Correlation Between Rev and Deere

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Can any of the company-specific risk be diversified away by investing in both Rev 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 Rev and Deere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rev Group and Deere Company, you can compare the effects of market volatilities on Rev 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 Rev with a short position of Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rev and Deere.

Diversification Opportunities for Rev and Deere

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Rev and Deere is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Rev 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 Rev Group 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 Rev i.e., Rev and Deere go up and down completely randomly.

Pair Corralation between Rev and Deere

Given the investment horizon of 90 days Rev Group is expected to generate 1.89 times more return on investment than Deere. However, Rev is 1.89 times more volatile than Deere Company. It trades about 0.13 of its potential returns per unit of risk. Deere Company is currently generating about 0.06 per unit of risk. If you would invest  1,262  in Rev Group on September 1, 2024 and sell it today you would earn a total of  1,840  from holding Rev Group or generate 145.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Rev Group  vs.  Deere Company

 Performance 
       Timeline  
Rev Group 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rev is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
Deere Company 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rev and Deere Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rev and Deere

The main advantage of trading using opposite Rev and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rev 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.
The idea behind Rev Group and Deere Company 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.
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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