Correlation Between Deere and Daimler Truck
Can any of the company-specific risk be diversified away by investing in both Deere and Daimler Truck at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Deere and Daimler Truck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Daimler Truck Holding, you can compare the effects of market volatilities on Deere and Daimler Truck and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Deere with a short position of Daimler Truck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Daimler Truck.
Diversification Opportunities for Deere and Daimler Truck
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Deere and Daimler is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Daimler Truck Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daimler Truck Holding and Deere is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Deere Company are associated (or correlated) with Daimler Truck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daimler Truck Holding has no effect on the direction of Deere i.e., Deere and Daimler Truck go up and down completely randomly.
Pair Corralation between Deere and Daimler Truck
Allowing for the 90-day total investment horizon Deere is expected to generate 1.76 times less return on investment than Daimler Truck. But when comparing it to its historical volatility, Deere Company is 1.27 times less risky than Daimler Truck. It trades about 0.02 of its potential returns per unit of risk. Daimler Truck Holding is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,948 in Daimler Truck Holding on August 31, 2024 and sell it today you would earn a total of 660.00 from holding Daimler Truck Holding or generate 22.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Deere Company vs. Daimler Truck Holding
Performance |
| Timeline |
| Deere Company |
| Daimler Truck Holding |
Deere and Daimler Truck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Daimler Truck
The main advantage of trading using opposite Deere and Daimler Truck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Daimler Truck can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Daimler Truck will offset losses from the drop in Daimler Truck's long position.The idea behind Deere Company and Daimler Truck Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Daimler Truck vs. American Premium Water | Daimler Truck vs. AmeraMex International | Daimler Truck vs. Arts Way Manufacturing Co | Daimler Truck vs. Astec Industries |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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