Correlation Between Titan International and Deere

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

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

Diversification Opportunities for Titan International and Deere

-0.36

Correlation Coefficient

Titan International  Deere

Very good diversification

The 3 months correlation between Titan and Deere is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Titan International and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Titan International 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 Titan International 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 Titan International i.e., Titan International and Deere go up and down completely randomly.

Pair Corralation between Titan International and Deere

Considering the 90-day investment horizon Titan International is expected to under-perform the Deere. In addition to that, Titan International is 1.03 times more volatile than Deere Company. It trades about -0.21 of its total potential returns per unit of risk. Deere Company is currently generating about 0.01 per unit of volatility. If you would invest  39,656  in Deere Company on January 24, 2024 and sell it today you would earn a total of  65.00  from holding Deere Company or generate 0.16% return on investment over 90 days.

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

Titan International  vs.  Deere Company

Titan International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Deere Company

Risk-Adjusted Performance

3 of 100

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.

Pair Trading with Titan International and Deere

The main advantage of trading using opposite Titan International and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan International 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 Titan International 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.