Correlation Between Sanwire and Deere

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

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

Diversification Opportunities for Sanwire and Deere

-0.39

Correlation Coefficient

Sanwire  Deere

Very good diversification

The 3 months correlation between Sanwire and Deere is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sanwire and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and Sanwire 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 Sanwire 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 Sanwire i.e., Sanwire and Deere go up and down completely randomly.

Pair Corralation between Sanwire and Deere

Given the investment horizon of 90 days Sanwire is expected to generate 16.74 times more return on investment than Deere. However, Sanwire is 16.74 times more volatile than Deere Company. It trades about 0.09 of its potential returns per unit of risk. Deere Company is currently generating about 0.05 per unit of risk. If you would invest  0.10  in Sanwire on September 21, 2024 and sell it today you would lose (0.06) from holding Sanwire or give up 60.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.07%
Values	Daily Returns

Sanwire  vs.  Deere Company

Sanwire

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sanwire are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Sanwire reported solid returns over the last few months and may actually be approaching a breakup point.

Deere Company

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 4 (%) 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.

Pair Trading with Sanwire and Deere

The main advantage of trading using opposite Sanwire and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanwire 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 Sanwire 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.