Correlation Between SPDR SP and Deere
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Deere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Bank and Deere Company, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Deere.
Diversification Opportunities for SPDR SP and Deere
Very weak diversification
The 3 months correlation between SPDR and Deere is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Bank and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and SPDR SP 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 SPDR SP Bank 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 SPDR SP i.e., SPDR SP and Deere go up and down completely randomly.
Pair Corralation between SPDR SP and Deere
Considering the 90-day investment horizon SPDR SP Bank is expected to under-perform the Deere. In addition to that, SPDR SP is 1.17 times more volatile than Deere Company. It trades about -0.17 of its total potential returns per unit of risk. Deere Company is currently generating about 0.08 per unit of volatility. If you would invest 39,260 in Deere Company on January 20, 2024 and sell it today you would earn a total of 800.00 from holding Deere Company or generate 2.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Bank vs. Deere Company
Performance |
| Timeline |
| SPDR SP Bank |
| Deere Company |
SPDR SP and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Deere
The main advantage of trading using opposite SPDR SP and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. Energy Select Sector | SPDR SP vs. Technology Select Sector | SPDR SP vs. Health Care Select | SPDR SP vs. Industrial Select Sector |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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