Correlation Between Deere and Mahindra Mahindra
Can any of the company-specific risk be diversified away by investing in both Deere and Mahindra Mahindra 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 Mahindra Mahindra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Mahindra Mahindra Limited, you can compare the effects of market volatilities on Deere and Mahindra Mahindra 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 Mahindra Mahindra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Mahindra Mahindra.
Diversification Opportunities for Deere and Mahindra Mahindra
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Deere and Mahindra is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Mahindra Mahindra Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahindra Mahindra 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 Mahindra Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahindra Mahindra has no effect on the direction of Deere i.e., Deere and Mahindra Mahindra go up and down completely randomly.
Pair Corralation between Deere and Mahindra Mahindra
Allowing for the 90-day total investment horizon Deere is expected to generate 8.27 times less return on investment than Mahindra Mahindra. But when comparing it to its historical volatility, Deere Company is 2.1 times less risky than Mahindra Mahindra. It trades about 0.03 of its potential returns per unit of risk. Mahindra Mahindra Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,383 in Mahindra Mahindra Limited on November 28, 2024 and sell it today you would earn a total of 1,912 from holding Mahindra Mahindra Limited or generate 138.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 54.45% |
| Values | Daily Returns |
Deere Company vs. Mahindra Mahindra Limited
Performance |
| Timeline |
| Deere Company |
| Mahindra Mahindra |
Deere and Mahindra Mahindra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Mahindra Mahindra
The main advantage of trading using opposite Deere and Mahindra Mahindra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Mahindra Mahindra 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 Mahindra Mahindra will offset losses from the drop in Mahindra Mahindra's long position.The idea behind Deere Company and Mahindra Mahindra Limited 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.| Mahindra Mahindra vs. Nio Class A | Mahindra Mahindra vs. Li Auto | Mahindra Mahindra vs. Rivian Automotive | Mahindra Mahindra vs. Lucid Group |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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