Correlation Between Deere and Amazon

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Can any of the company-specific risk be diversified away by investing in both Deere and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deere Company and Amazon Inc, you can compare the effects of market volatilities on Deere and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Amazon.

Diversification Opportunities for Deere and Amazon

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Deere and Amazon is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Deere i.e., Deere and Amazon go up and down completely randomly.

Pair Corralation between Deere and Amazon

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.57 times more return on investment than Amazon. However, Deere Company is 1.75 times less risky than Amazon. It trades about 0.2 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.14 per unit of risk. If you would invest  33,709  in Deere Company on August 29, 2022 and sell it today you would earn a total of  10,438  from holding Deere Company or generate 30.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.82%
ValuesDaily Returns

Deere Company  vs.  Amazon Inc

 Performance (%) 
       Timeline  
Deere Company 
Deere Performance
10 of 100
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 rather fragile technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Deere Price Channel

Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Deere and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deere and Amazon

The main advantage of trading using opposite Deere and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
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The idea behind Deere Company and Amazon Inc 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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Check out your portfolio center. 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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