Correlation Between Deere and Nextracker
Can any of the company-specific risk be diversified away by investing in both Deere and Nextracker 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 Nextracker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Nextracker Class A, you can compare the effects of market volatilities on Deere and Nextracker 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 Nextracker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Nextracker.
Diversification Opportunities for Deere and Nextracker
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Deere and Nextracker is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Nextracker Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextracker Class A 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 Nextracker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextracker Class A has no effect on the direction of Deere i.e., Deere and Nextracker go up and down completely randomly.
Pair Corralation between Deere and Nextracker
Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.41 times more return on investment than Nextracker. However, Deere Company is 2.45 times less risky than Nextracker. It trades about 0.05 of its potential returns per unit of risk. Nextracker Class A is currently generating about 0.02 per unit of risk. If you would invest 35,595 in Deere Company on August 27, 2024 and sell it today you would earn a total of 9,070 from holding Deere Company or generate 25.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deere Company vs. Nextracker Class A
Performance |
| Timeline |
| Deere Company |
| Nextracker Class A |
Deere and Nextracker Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Nextracker
The main advantage of trading using opposite Deere and Nextracker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Nextracker 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 Nextracker will offset losses from the drop in Nextracker's long position.| Deere vs. MYR Group | Deere vs. Granite Construction Incorporated | Deere vs. Construction Partners | Deere vs. Great Lakes Dredge |
| Nextracker vs. 1847 Holdings LLC | Nextracker vs. Westport Fuel Systems | Nextracker vs. Falcons Beyond Global, | Nextracker vs. Brookfield Business Partners |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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