Correlation Between AB Volvo and Deere

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

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

Diversification Opportunities for AB Volvo and Deere

-0.53

Correlation Coefficient

AB Volvo  Deere

Excellent diversification

The 3 months correlation between VOLAF and Deere is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and AB Volvo 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 AB Volvo 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 AB Volvo i.e., AB Volvo and Deere go up and down completely randomly.

Pair Corralation between AB Volvo and Deere

Assuming the 90 days horizon AB Volvo is expected to generate 1.26 times more return on investment than Deere. However, AB Volvo is 1.26 times more volatile than Deere Company. It trades about 0.05 of its potential returns per unit of risk. Deere Company is currently generating about 0.01 per unit of risk. If you would invest  1,987  in AB Volvo on September 14, 2024 and sell it today you would earn a total of  589.00  from holding AB Volvo or generate 29.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.06%
Values	Daily Returns

AB Volvo  vs.  Deere Company

AB Volvo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AB Volvo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AB Volvo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Deere Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 9 (%) 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 AB Volvo and Deere

The main advantage of trading using opposite AB Volvo and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo 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 AB Volvo 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.