Correlation Between China Power and Deere
Can any of the company-specific risk be diversified away by investing in both China Power 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 China Power and Deere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Power International and Deere Company, you can compare the effects of market volatilities on China Power 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 China Power with a short position of Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Power and Deere.
Diversification Opportunities for China Power and Deere
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Deere is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Power International and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and China Power 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 China Power International 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 China Power i.e., China Power and Deere go up and down completely randomly.
Pair Corralation between China Power and Deere
If you would invest 39,656 in Deere Company on January 24, 2024 and sell it today you would earn a total of 305.00 from holding Deere Company or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
China Power International vs. Deere Company
Performance |
| Timeline |
| China Power International |
| Deere Company |
China Power and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Power and Deere
The main advantage of trading using opposite China Power and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Power 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.| China Power vs. Duke Energy | China Power vs. Southern Company | China Power vs. American Electric Power | China Power vs. Nextera Energy |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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