Correlation Between Deere and Titan International

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

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

Diversification Opportunities for Deere and Titan International

-0.16

Correlation Coefficient

Deere  Titan International

Good diversification

The 3 months correlation between Deere and Titan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Titan International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan International 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 Titan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan International has no effect on the direction of Deere i.e., Deere and Titan International go up and down completely randomly.

Pair Corralation between Deere and Titan International

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.42 times more return on investment than Titan International. However, Deere Company is 2.37 times less risky than Titan International. It trades about -0.15 of its potential returns per unit of risk. Titan International is currently generating about -0.42 per unit of risk. If you would invest  38,750  in Deere Company on March 2, 2024 and sell it today you would lose (1,915) from holding Deere Company or give up 4.94% 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.  Titan International

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Deere and Titan International

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

The idea behind Deere Company and Titan International 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.