Correlation Between Deere and AgrifyCorp
Can any of the company-specific risk be diversified away by investing in both Deere and AgrifyCorp 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 AgrifyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and AgrifyCorp, you can compare the effects of market volatilities on Deere and AgrifyCorp 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 AgrifyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and AgrifyCorp.
Diversification Opportunities for Deere and AgrifyCorp
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Deere and AgrifyCorp is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and AgrifyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AgrifyCorp 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 AgrifyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AgrifyCorp has no effect on the direction of Deere i.e., Deere and AgrifyCorp go up and down completely randomly.
Pair Corralation between Deere and AgrifyCorp
Allowing for the 90-day total investment horizon Deere Company is expected to under-perform the AgrifyCorp. But the stock apears to be less risky and, when comparing its historical volatility, Deere Company is 5.07 times less risky than AgrifyCorp. The stock trades about -0.16 of its potential returns per unit of risk. The AgrifyCorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 30.00 in AgrifyCorp on March 2, 2024 and sell it today you would lose (1.00) from holding AgrifyCorp or give up 3.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Deere Company vs. AgrifyCorp
Performance |
Timeline |
Deere Company |
AgrifyCorp |
Deere and AgrifyCorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Deere and AgrifyCorp
The main advantage of trading using opposite Deere and AgrifyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, AgrifyCorp 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 AgrifyCorp will offset losses from the drop in AgrifyCorp's long position.Deere vs. PACCAR Inc | Deere vs. Lion Electric Corp | Deere vs. Wabash National | Deere vs. Ep Emerging Markets |
AgrifyCorp vs. MYR Group | AgrifyCorp vs. Granite Construction Incorporated | AgrifyCorp vs. Construction Partners | AgrifyCorp vs. Great Lakes Dredge |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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