Correlation Between Deere and Hillman Solutions
Can any of the company-specific risk be diversified away by investing in both Deere and Hillman Solutions 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 Hillman Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Hillman Solutions Corp, you can compare the effects of market volatilities on Deere and Hillman Solutions 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 Hillman Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Hillman Solutions.
Diversification Opportunities for Deere and Hillman Solutions
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deere and Hillman is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Hillman Solutions Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillman Solutions Corp 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 Hillman Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillman Solutions Corp has no effect on the direction of Deere i.e., Deere and Hillman Solutions go up and down completely randomly.
Pair Corralation between Deere and Hillman Solutions
Allowing for the 90-day total investment horizon Deere Company is expected to generate 1.41 times more return on investment than Hillman Solutions. However, Deere is 1.41 times more volatile than Hillman Solutions Corp. It trades about 0.29 of its potential returns per unit of risk. Hillman Solutions Corp is currently generating about 0.12 per unit of risk. If you would invest 40,469 in Deere Company on August 31, 2024 and sell it today you would earn a total of 6,131 from holding Deere Company or generate 15.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deere Company vs. Hillman Solutions Corp
Performance |
| Timeline |
| Deere Company |
| Hillman Solutions Corp |
Deere and Hillman Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Hillman Solutions
The main advantage of trading using opposite Deere and Hillman Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Hillman Solutions 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 Hillman Solutions will offset losses from the drop in Hillman Solutions' long position.The idea behind Deere Company and Hillman Solutions Corp 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.| Hillman Solutions vs. Kennametal | Hillman Solutions vs. AB SKF | Hillman Solutions vs. Eastern Co | Hillman Solutions vs. Timken Company |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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