Correlation Between Deere and Wabash National
Can any of the company-specific risk be diversified away by investing in both Deere and Wabash National 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 Wabash National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Wabash National, you can compare the effects of market volatilities on Deere and Wabash National 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 Wabash National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Wabash National.
Diversification Opportunities for Deere and Wabash National
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Deere and Wabash is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Deere i.e., Deere and Wabash National go up and down completely randomly.
Pair Corralation between Deere and Wabash National
Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.67 times more return on investment than Wabash National. However, Deere Company is 1.5 times less risky than Wabash National. It trades about 0.01 of its potential returns per unit of risk. Wabash National is currently generating about -0.01 per unit of risk. If you would invest 42,644 in Deere Company on August 27, 2024 and sell it today you would earn a total of 2,021 from holding Deere Company or generate 4.74% 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. Wabash National
Performance |
| Timeline |
| Deere Company |
| Wabash National |
Deere and Wabash National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Wabash National
The main advantage of trading using opposite Deere and Wabash National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Wabash National 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 Wabash National will offset losses from the drop in Wabash National's long position.| Deere vs. MYR Group | Deere vs. Granite Construction Incorporated | Deere vs. Construction Partners | Deere vs. Great Lakes Dredge |
| Wabash National vs. Rev Group | Wabash National vs. Gencor Industries | Wabash National vs. Alamo Group | Wabash National vs. Columbus McKinnon |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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