Correlation Between Deere and Gencor Industries
Can any of the company-specific risk be diversified away by investing in both Deere and Gencor Industries 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 Gencor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Gencor Industries, you can compare the effects of market volatilities on Deere and Gencor Industries 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 Gencor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Gencor Industries.
Diversification Opportunities for Deere and Gencor Industries
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Deere and Gencor is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor Industries 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 Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of Deere i.e., Deere and Gencor Industries go up and down completely randomly.
Pair Corralation between Deere and Gencor Industries
Allowing for the 90-day total investment horizon Deere Company is expected to under-perform the Gencor Industries. But the stock apears to be less risky and, when comparing its historical volatility, Deere Company is 1.21 times less risky than Gencor Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Gencor Industries is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,610 in Gencor Industries on January 26, 2024 and sell it today you would earn a total of 78.00 from holding Gencor Industries or generate 4.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Deere Company vs. Gencor Industries
Performance |
Timeline |
Deere Company |
Gencor Industries |
Deere and Gencor Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Deere and Gencor Industries
The main advantage of trading using opposite Deere and Gencor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Gencor Industries 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 Gencor Industries will offset losses from the drop in Gencor Industries' long position.The idea behind Deere Company and Gencor Industries 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.Gencor Industries vs. Alamo Group | Gencor Industries vs. Manitowoc | Gencor Industries vs. Manitex International | Gencor Industries vs. Columbus McKinnon |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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