Correlation Between Deere and First CommunityPFD
Can any of the company-specific risk be diversified away by investing in both Deere and First CommunityPFD 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 First CommunityPFD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and First Community, you can compare the effects of market volatilities on Deere and First CommunityPFD 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 First CommunityPFD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and First CommunityPFD.
Diversification Opportunities for Deere and First CommunityPFD
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deere and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First CommunityPFD 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 First CommunityPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First CommunityPFD has no effect on the direction of Deere i.e., Deere and First CommunityPFD go up and down completely randomly.
Pair Corralation between Deere and First CommunityPFD
Allowing for the 90-day total investment horizon Deere is expected to generate 2.1 times less return on investment than First CommunityPFD. In addition to that, Deere is 1.08 times more volatile than First Community. It trades about 0.01 of its total potential returns per unit of risk. First Community is currently generating about 0.03 per unit of volatility. If you would invest 768.00 in First Community on August 26, 2024 and sell it today you would earn a total of 122.00 from holding First Community or generate 15.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 82.7% |
| Values | Daily Returns |
Deere Company vs. First Community
Performance |
| Timeline |
| Deere Company |
| First CommunityPFD |
Deere and First CommunityPFD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and First CommunityPFD
The main advantage of trading using opposite Deere and First CommunityPFD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, First CommunityPFD 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 First CommunityPFD will offset losses from the drop in First CommunityPFD's long position.The idea behind Deere Company and First Community 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.| First CommunityPFD vs. KeyCorp | First CommunityPFD vs. Maplebear Common Stock | First CommunityPFD vs. Webster Financial | First CommunityPFD vs. Aquagold International |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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