Correlation Between Daimler Truck and Deere

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

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

Diversification Opportunities for Daimler Truck and Deere

0.14

Correlation Coefficient

Daimler Truck  Deere

Average diversification

The 3 months correlation between Daimler and Deere is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Daimler Truck Holding and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Daimler Truck 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 Daimler Truck Holding 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 Daimler Truck i.e., Daimler Truck and Deere go up and down completely randomly.

Pair Corralation between Daimler Truck and Deere

Assuming the 90 days trading horizon Daimler Truck Holding is expected to generate 1.15 times more return on investment than Deere. However, Daimler Truck is 1.15 times more volatile than Deere Company. It trades about 0.04 of its potential returns per unit of risk. Deere Company is currently generating about 0.01 per unit of risk. If you would invest  2,687  in Daimler Truck Holding on September 23, 2024 and sell it today you would earn a total of  1,011  from holding Daimler Truck Holding or generate 37.63% return on investment over 90 days.

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

Daimler Truck Holding  vs.  Deere Company

Daimler Truck Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Daimler Truck unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively unsteady basic indicators, Deere unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daimler Truck and Deere

The main advantage of trading using opposite Daimler Truck and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daimler Truck 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 Daimler Truck Holding 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.