Correlation Between Caterpillar and Ag Growth
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Ag Growth 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 Ag Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Ag Growth International, you can compare the effects of market volatilities on Caterpillar and Ag Growth 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 Ag Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Ag Growth.
Diversification Opportunities for Caterpillar and Ag Growth
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and AGGZF is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Ag Growth International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ag Growth International 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 Ag Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ag Growth International has no effect on the direction of Caterpillar i.e., Caterpillar and Ag Growth go up and down completely randomly.
Pair Corralation between Caterpillar and Ag Growth
Considering the 90-day investment horizon Caterpillar is expected to generate 2.92 times less return on investment than Ag Growth. In addition to that, Caterpillar is 1.19 times more volatile than Ag Growth International. It trades about 0.07 of its total potential returns per unit of risk. Ag Growth International is currently generating about 0.23 per unit of volatility. If you would invest 3,430 in Ag Growth International on August 24, 2024 and sell it today you would earn a total of 362.00 from holding Ag Growth International or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Ag Growth International
Performance |
| Timeline |
| Caterpillar |
| Ag Growth International |
Caterpillar and Ag Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Ag Growth
The main advantage of trading using opposite Caterpillar and Ag Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Ag Growth 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 Ag Growth will offset losses from the drop in Ag Growth's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Ag Growth vs. Element Solutions | Ag Growth vs. Orion Engineered Carbons | Ag Growth vs. Minerals Technologies | Ag Growth vs. Ingevity Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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