Correlation Between Micropac Industries and Deere

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

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

Diversification Opportunities for Micropac Industries and Deere

0.52

Correlation Coefficient

Micropac Industries  Deere

Very weak diversification

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

Pair Corralation between Micropac Industries and Deere

Given the investment horizon of 90 days Micropac Industries is expected to generate 16.05 times less return on investment than Deere. But when comparing it to its historical volatility, Micropac Industries is 8.6 times less risky than Deere. It trades about 0.11 of its potential returns per unit of risk. Deere Company is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  40,265  in Deere Company on September 12, 2024 and sell it today you would earn a total of  4,131  from holding Deere Company or generate 10.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Micropac Industries  vs.  Deere Company

Micropac Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Micropac Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Micropac Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Deere Company

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Micropac Industries and Deere

The main advantage of trading using opposite Micropac Industries and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micropac 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 Micropac 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.