Correlation Between Deere and Knight Transportation

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

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

Diversification Opportunities for Deere and Knight Transportation

0.18

Correlation Coefficient

Deere  Knight Transportation

Average diversification

The 3 months correlation between Deere and Knight is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation 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 Knight Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Transportation has no effect on the direction of Deere i.e., Deere and Knight Transportation go up and down completely randomly.

Pair Corralation between Deere and Knight Transportation

Allowing for the 90-day total investment horizon Deere Company is expected to generate 0.69 times more return on investment than Knight Transportation. However, Deere Company is 1.46 times less risky than Knight Transportation. It trades about 0.09 of its potential returns per unit of risk. Knight Transportation is currently generating about 0.02 per unit of risk. If you would invest  47,091  in Deere Company on May 7, 2025 and sell it today you would earn a total of  3,965  from holding Deere Company or generate 8.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Deere Company  vs.  Knight Transportation

Deere Company

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Deere may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Knight Transportation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Transportation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Knight Transportation is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deere and Knight Transportation

The main advantage of trading using opposite Deere and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Knight Transportation 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 Knight Transportation will offset losses from the drop in Knight Transportation's long position.

The idea behind Deere Company and Knight Transportation 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.