Correlation Between Daito Trust and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Daito Trust 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 Daito Trust and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daito Trust Construction and Caterpillar, you can compare the effects of market volatilities on Daito Trust 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 Daito Trust with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and Caterpillar.
Diversification Opportunities for Daito Trust and Caterpillar
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Daito and Caterpillar is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Daito Trust 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 Daito Trust Construction 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 Daito Trust i.e., Daito Trust and Caterpillar go up and down completely randomly.
Pair Corralation between Daito Trust and Caterpillar
Assuming the 90 days horizon Daito Trust is expected to generate 5.22 times less return on investment than Caterpillar. But when comparing it to its historical volatility, Daito Trust Construction is 1.3 times less risky than Caterpillar. It trades about 0.02 of its potential returns per unit of risk. Caterpillar is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 21,248 in Caterpillar on September 4, 2024 and sell it today you would earn a total of 16,402 from holding Caterpillar or generate 77.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daito Trust Construction vs. Caterpillar
Performance |
| Timeline |
| Daito Trust Construction |
| Caterpillar |
Daito Trust and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daito Trust and Caterpillar
The main advantage of trading using opposite Daito Trust and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust 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.| Daito Trust vs. COSTAR GROUP INC | Daito Trust vs. CBRE Group Class | Daito Trust vs. Vonovia SE | Daito Trust vs. Vonovia SE |
| Caterpillar vs. ALTAIR RES INC | Caterpillar vs. Daito Trust Construction | Caterpillar vs. Enter Air SA | Caterpillar vs. DELTA AIR LINES |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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