Correlation Between Deere and Lindsay

Can any of the company-specific risk be diversified away by investing in both Deere and Lindsay 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 Lindsay into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deere Company and Lindsay, you can compare the effects of market volatilities on Deere and Lindsay 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 Lindsay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Lindsay.

Diversification Opportunities for Deere and Lindsay

-0.19

Correlation Coefficient

Deere  Lindsay

Good diversification

The 3 months correlation between Deere and Lindsay is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay 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 Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of Deere i.e., Deere and Lindsay go up and down completely randomly.

Pair Corralation between Deere and Lindsay

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.82 times more return on investment than Lindsay. However, Deere Company is 1.22 times less risky than Lindsay. It trades about -0.02 of its potential returns per unit of risk. Lindsay is currently generating about -0.02 per unit of risk. If you would invest  39,705  in Deere Company on January 26, 2024 and sell it today you would lose (243.00) from holding Deere Company or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Deere Company  vs.  Lindsay

Deere Company

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Deere is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Lindsay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindsay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Deere and Lindsay

The main advantage of trading using opposite Deere and Lindsay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Lindsay 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 Lindsay will offset losses from the drop in Lindsay's long position.

The idea behind Deere Company and Lindsay 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.