Correlation Between Lion Electric and Deere

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Can any of the company-specific risk be diversified away by investing in both Lion Electric 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 Lion Electric and Deere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Electric Corp and Deere Company, you can compare the effects of market volatilities on Lion Electric 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 Lion Electric with a short position of Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Electric and Deere.

Diversification Opportunities for Lion Electric and Deere

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Lion and Deere is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Lion Electric 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 Lion Electric Corp 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 Lion Electric i.e., Lion Electric and Deere go up and down completely randomly.

Pair Corralation between Lion Electric and Deere

Considering the 90-day investment horizon Lion Electric Corp is expected to under-perform the Deere. In addition to that, Lion Electric is 4.7 times more volatile than Deere Company. It trades about -0.15 of its total potential returns per unit of risk. Deere Company is currently generating about 0.6 per unit of volatility. If you would invest  36,346  in Deere Company on December 30, 2023 and sell it today you would earn a total of  4,728  from holding Deere Company or generate 13.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Lion Electric Corp  vs.  Deere Company

 Performance 
       Timeline  
Lion Electric Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Lion Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
Deere Company 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 3 (%) 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.

Lion Electric and Deere Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lion Electric and Deere

The main advantage of trading using opposite Lion Electric and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Electric 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.
The idea behind Lion Electric Corp and Deere Company 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.
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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