Correlation Between Komatsu and Deere
Can any of the company-specific risk be diversified away by investing in both Komatsu and Deere 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 Komatsu and Deere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Komatsu and Deere Company, you can compare the effects of market volatilities on Komatsu and Deere 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 Komatsu with a short position of Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Komatsu and Deere.
Diversification Opportunities for Komatsu and Deere
Very weak diversification
The 3 months correlation between Komatsu and Deere is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Komatsu 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 Komatsu are associated (or correlated) with Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of Komatsu i.e., Komatsu and Deere go up and down completely randomly.
Pair Corralation between Komatsu and Deere
Assuming the 90 days trading horizon Komatsu is expected to generate 1.14 times more return on investment than Deere. However, Komatsu is 1.14 times more volatile than Deere Company. It trades about 0.02 of its potential returns per unit of risk. Deere Company is currently generating about 0.02 per unit of risk. If you would invest 2,225 in Komatsu on September 3, 2024 and sell it today you would earn a total of 306.00 from holding Komatsu or generate 13.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Komatsu vs. Deere Company
Performance |
| Timeline |
| Komatsu |
| Deere Company |
Komatsu and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Komatsu and Deere
The main advantage of trading using opposite Komatsu and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Komatsu position performs unexpectedly, Deere 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 Deere will offset losses from the drop in Deere's long position.| Komatsu vs. Transportadora de Gas | Komatsu vs. Air Transport Services | Komatsu vs. RYU Apparel | Komatsu vs. NTG Nordic Transport |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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