Correlation Between Caterpillar and America Great
Can any of the company-specific risk be diversified away by investing in both Caterpillar and America Great 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 Caterpillar and America Great into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and America Great Health, you can compare the effects of market volatilities on Caterpillar and America Great 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 Caterpillar with a short position of America Great. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and America Great.
Diversification Opportunities for Caterpillar and America Great
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and America is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and America Great Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Great Health and Caterpillar 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 Caterpillar are associated (or correlated) with America Great. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Great Health has no effect on the direction of Caterpillar i.e., Caterpillar and America Great go up and down completely randomly.
Pair Corralation between Caterpillar and America Great
If you would invest 38,573 in Caterpillar on August 24, 2024 and sell it today you would earn a total of 386.00 from holding Caterpillar or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Caterpillar vs. America Great Health
Performance |
| Timeline |
| Caterpillar |
| America Great Health |
Caterpillar and America Great Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and America Great
The main advantage of trading using opposite Caterpillar and America Great positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, America Great 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 America Great will offset losses from the drop in America Great's long position.| 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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