Correlation Between Astec Industries and Deere

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

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

Diversification Opportunities for Astec Industries and Deere

0.52

Correlation Coefficient

Astec Industries  Deere

Very weak diversification

The 3 months correlation between Astec and Deere is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Astec Industries and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Astec Industries 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 Astec Industries 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 Astec Industries i.e., Astec Industries and Deere go up and down completely randomly.

Pair Corralation between Astec Industries and Deere

Given the investment horizon of 90 days Astec Industries is expected to generate 1.01 times less return on investment than Deere. In addition to that, Astec Industries is 1.7 times more volatile than Deere Company. It trades about 0.04 of its total potential returns per unit of risk. Deere Company is currently generating about 0.08 per unit of volatility. If you would invest  35,573  in Deere Company on September 4, 2024 and sell it today you would earn a total of  10,352  from holding Deere Company or generate 29.1% return on investment over 90 days.

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

Astec Industries  vs.  Deere Company

Astec Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Astec Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Deere Company

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 12 (%) 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 Astec Industries and Deere

The main advantage of trading using opposite Astec Industries and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astec Industries 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 Astec Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.