Correlation Between Caterpillar and WisdomTree Yield
Can any of the company-specific risk be diversified away by investing in both Caterpillar and WisdomTree Yield 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 WisdomTree Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and WisdomTree Yield Enhanced, you can compare the effects of market volatilities on Caterpillar and WisdomTree Yield 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 WisdomTree Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and WisdomTree Yield.
Diversification Opportunities for Caterpillar and WisdomTree Yield
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and WisdomTree is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and WisdomTree Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Yield Enhanced 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 WisdomTree Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Yield Enhanced has no effect on the direction of Caterpillar i.e., Caterpillar and WisdomTree Yield go up and down completely randomly.
Pair Corralation between Caterpillar and WisdomTree Yield
Considering the 90-day investment horizon Caterpillar is expected to generate 4.87 times more return on investment than WisdomTree Yield. However, Caterpillar is 4.87 times more volatile than WisdomTree Yield Enhanced. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Yield Enhanced is currently generating about 0.04 per unit of risk. If you would invest 29,096 in Caterpillar on September 19, 2024 and sell it today you would earn a total of 8,484 from holding Caterpillar or generate 29.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. WisdomTree Yield Enhanced
Performance |
| Timeline |
| Caterpillar |
| WisdomTree Yield Enhanced |
Caterpillar and WisdomTree Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and WisdomTree Yield
The main advantage of trading using opposite Caterpillar and WisdomTree Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, WisdomTree Yield 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 WisdomTree Yield will offset losses from the drop in WisdomTree Yield's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
| WisdomTree Yield vs. WisdomTree Interest Rate | WisdomTree Yield vs. WisdomTree Interest Rate | WisdomTree Yield vs. SPDR Barclays Intermediate | WisdomTree Yield vs. WisdomTree International Hedged |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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