Correlation Between Enter Air and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Enter Air and Caterpillar 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 Enter Air and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enter Air SA and Caterpillar, you can compare the effects of market volatilities on Enter Air and Caterpillar 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 Enter Air with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enter Air and Caterpillar.
Diversification Opportunities for Enter Air and Caterpillar
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Enter and Caterpillar is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Enter Air SA and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Enter Air 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 Enter Air SA are associated (or correlated) with Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Enter Air i.e., Enter Air and Caterpillar go up and down completely randomly.
Pair Corralation between Enter Air and Caterpillar
Assuming the 90 days trading horizon Enter Air SA is expected to generate 5.45 times more return on investment than Caterpillar. However, Enter Air is 5.45 times more volatile than Caterpillar. It trades about 0.04 of its potential returns per unit of risk. Caterpillar is currently generating about 0.05 per unit of risk. If you would invest 1,230 in Enter Air SA on September 12, 2024 and sell it today you would earn a total of 8.00 from holding Enter Air SA or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enter Air SA vs. Caterpillar
Performance |
| Timeline |
| Enter Air SA |
| Caterpillar |
Enter Air and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enter Air and Caterpillar
The main advantage of trading using opposite Enter Air and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enter Air position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.The idea behind Enter Air SA and Caterpillar 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.| Caterpillar vs. AB Volvo | Caterpillar vs. Daimler Truck Holding | Caterpillar vs. Superior Plus Corp | Caterpillar vs. SIVERS SEMICONDUCTORS AB |
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 the Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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