Correlation Between McDonalds Corp and Deere

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

Diversification Opportunities for McDonalds Corp and Deere

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between McDonalds and Deere is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company and McDonalds Corp 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 McDonalds Corp 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 McDonalds Corp i.e., McDonalds Corp and Deere go up and down completely randomly.

Pair Corralation between McDonalds Corp and Deere

Considering the 90-day investment horizon McDonalds Corp is expected to under-perform the Deere. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds Corp is 1.48 times less risky than Deere. The stock trades about -0.43 of its potential returns per unit of risk. The Deere Company is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  36,106  in Deere Company on July 5, 2022 and sell it today you would lose (2,717)  from holding Deere Company or give up 7.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

McDonalds Corp  vs.  Deere Company

 Performance (%) 
       Timeline  
McDonalds Corp 
McDonalds Performance
0 of 100
Over the last 90 days McDonalds Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

McDonalds Price Channel

Deere Company 
Deere Performance
9 of 100
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 conflicting technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Deere Price Channel

McDonalds Corp and Deere Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds Corp and Deere

The main advantage of trading using opposite McDonalds Corp and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp 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.
McDonalds Corp vs. Amazon Inc
The idea behind McDonalds Corp 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.
Deere vs. Amazon Inc
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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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