Correlation Between Caterpillar and AGF Management
Can any of the company-specific risk be diversified away by investing in both Caterpillar and AGF Management 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 AGF Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and AGF Management Limited, you can compare the effects of market volatilities on Caterpillar and AGF Management 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 AGF Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and AGF Management.
Diversification Opportunities for Caterpillar and AGF Management
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and AGF is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Caterpillar i.e., Caterpillar and AGF Management go up and down completely randomly.
Pair Corralation between Caterpillar and AGF Management
Considering the 90-day investment horizon Caterpillar is expected to generate 4.39 times less return on investment than AGF Management. But when comparing it to its historical volatility, Caterpillar is 1.03 times less risky than AGF Management. It trades about 0.05 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 664.00 in AGF Management Limited on August 31, 2024 and sell it today you would earn a total of 130.00 from holding AGF Management Limited or generate 19.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. AGF Management Limited
Performance |
| Timeline |
| Caterpillar |
| AGF Management |
Caterpillar and AGF Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and AGF Management
The main advantage of trading using opposite Caterpillar and AGF Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, AGF Management 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 AGF Management will offset losses from the drop in AGF Management's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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