Correlation Between Terex and Deere
Can any of the company-specific risk be diversified away by investing in both Terex 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 Terex and Deere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Terex and Deere Company, you can compare the effects of market volatilities on Terex 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 Terex with a short position of Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terex and Deere.
Diversification Opportunities for Terex and Deere
Significant diversification
The 3 months correlation between Terex and Deere is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Terex and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Terex 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 Terex 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 Terex i.e., Terex and Deere go up and down completely randomly.
Pair Corralation between Terex and Deere
Considering the 90-day investment horizon Terex is expected to generate 1.37 times less return on investment than Deere. In addition to that, Terex is 1.72 times more volatile than Deere Company. It trades about 0.03 of its total potential returns per unit of risk. Deere Company is currently generating about 0.06 per unit of volatility. If you would invest 35,473 in Deere Company on August 24, 2024 and sell it today you would earn a total of 8,281 from holding Deere Company or generate 23.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Terex vs. Deere Company
Performance |
| Timeline |
| Terex |
| Deere Company |
Terex and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Terex and Deere
The main advantage of trading using opposite Terex and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terex 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.| Terex vs. Oshkosh | Terex vs. Astec Industries | Terex vs. Hyster Yale Materials Handling | Terex vs. Manitex International |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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