Correlation Between Aurora Solar and Deere

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

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

Diversification Opportunities for Aurora Solar and Deere

-0.62

Correlation Coefficient

Aurora Solar  Deere

Excellent diversification

The 3 months correlation between Aurora and Deere is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Solar Technologies and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Aurora Solar 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 Aurora Solar Technologies 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 Aurora Solar i.e., Aurora Solar and Deere go up and down completely randomly.

Pair Corralation between Aurora Solar and Deere

Assuming the 90 days horizon Aurora Solar is expected to generate 1.83 times less return on investment than Deere. In addition to that, Aurora Solar is 6.39 times more volatile than Deere Company. It trades about 0.01 of its total potential returns per unit of risk. Deere Company is currently generating about 0.13 per unit of volatility. If you would invest  39,329  in Deere Company on September 13, 2024 and sell it today you would earn a total of  5,474  from holding Deere Company or generate 13.92% return on investment over 90 days.

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

Aurora Solar Technologies  vs.  Deere Company

Aurora Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Solar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Aurora Solar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deere Company

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Solar and Deere

The main advantage of trading using opposite Aurora Solar and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Solar 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 Aurora Solar Technologies 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.