Correlation Between Aquagold International and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Aquagold International 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 Aquagold International and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aquagold International and Caterpillar, you can compare the effects of market volatilities on Aquagold International 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 Aquagold International with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquagold International and Caterpillar.
Diversification Opportunities for Aquagold International and Caterpillar
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aquagold and Caterpillar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Aquagold International 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 Aquagold International 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 Aquagold International i.e., Aquagold International and Caterpillar go up and down completely randomly.
Pair Corralation between Aquagold International and Caterpillar
Given the investment horizon of 90 days Aquagold International is expected to under-perform the Caterpillar. In addition to that, Aquagold International is 15.72 times more volatile than Caterpillar. It trades about -0.22 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.22 per unit of volatility. If you would invest 36,604 in Caterpillar on October 21, 2024 and sell it today you would earn a total of 1,998 from holding Caterpillar or generate 5.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Aquagold International vs. Caterpillar
Performance |
| Timeline |
| Aquagold International |
| Caterpillar |
Aquagold International and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aquagold International and Caterpillar
The main advantage of trading using opposite Aquagold International and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquagold International 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.| Aquagold International vs. PepsiCo | Aquagold International vs. Coca Cola Consolidated | Aquagold International vs. Monster Beverage Corp | Aquagold International vs. Celsius Holdings |
| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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