Correlation Between Deere and Arts Way
Can any of the company-specific risk be diversified away by investing in both Deere and Arts Way 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 Arts Way into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Arts Way Manufacturing Co, you can compare the effects of market volatilities on Deere and Arts Way 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 Arts Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Arts Way.
Diversification Opportunities for Deere and Arts Way
Significant diversification
The 3 months correlation between Deere and Arts is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Arts Way Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arts Way Manufacturing 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 Arts Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arts Way Manufacturing has no effect on the direction of Deere i.e., Deere and Arts Way go up and down completely randomly.
Pair Corralation between Deere and Arts Way
Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.57 times more return on investment than Arts Way. However, Deere Company is 1.76 times less risky than Arts Way. It trades about 0.02 of its potential returns per unit of risk. Arts Way Manufacturing Co is currently generating about 0.0 per unit of risk. If you would invest 36,747 in Deere Company on January 26, 2024 and sell it today you would earn a total of 2,715 from holding Deere Company or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deere Company vs. Arts Way Manufacturing Co
Performance |
| Timeline |
| Deere Company |
| Arts Way Manufacturing |
Deere and Arts Way Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deere and Arts Way
The main advantage of trading using opposite Deere and Arts Way positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Arts Way 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 Arts Way will offset losses from the drop in Arts Way's long position.The idea behind Deere Company and Arts Way Manufacturing Co 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.| Arts Way vs. NikolaCorp | Arts Way vs. Ideanomics | Arts Way vs. Lion Electric Corp | Arts Way vs. Wabash National |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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