Correlation Between Deere and Lonking Holdings

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

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

Diversification Opportunities for Deere and Lonking Holdings

-0.26

Correlation Coefficient

Deere  Lonking Holdings

Very good diversification

The 3 months correlation between Deere and Lonking is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Lonking Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonking Holdings 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 Lonking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonking Holdings has no effect on the direction of Deere i.e., Deere and Lonking Holdings go up and down completely randomly.

Pair Corralation between Deere and Lonking Holdings

If you would invest  39,727  in Deere Company on February 12, 2024 and sell it today you would earn a total of  1,062  from holding Deere Company or generate 2.67% return on investment over 90 days.

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

Deere Company  vs.  Lonking Holdings Ltd

Deere Company

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 5 (%) 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.

Lonking Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lonking Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Lonking Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deere and Lonking Holdings

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

The idea behind Deere Company and Lonking Holdings Ltd 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.