Correlation Between Deere and Marijuana

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

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

Diversification Opportunities for Deere and Marijuana

-0.66

Correlation Coefficient

Deere  Marijuana

Excellent diversification

The 3 months correlation between Deere and Marijuana is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Marijuana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marijuana 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 Marijuana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marijuana has no effect on the direction of Deere i.e., Deere and Marijuana go up and down completely randomly.

Pair Corralation between Deere and Marijuana

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.13 times more return on investment than Marijuana. However, Deere Company is 7.8 times less risky than Marijuana. It trades about 0.1 of its potential returns per unit of risk. Marijuana is currently generating about -0.13 per unit of risk. If you would invest  40,446  in Deere Company on September 20, 2024 and sell it today you would earn a total of  3,913  from holding Deere Company or generate 9.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Deere Company  vs.  Marijuana

Deere Company

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Deere may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Marijuana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marijuana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Deere and Marijuana

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

The idea behind Deere Company and Marijuana 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.