Correlation Between Caterpillar and Active Health
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Active Health 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 Active Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Active Health Foods, you can compare the effects of market volatilities on Caterpillar and Active Health 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 Active Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Active Health.
Diversification Opportunities for Caterpillar and Active Health
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Active is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Active Health Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Health Foods 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 Active Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Health Foods has no effect on the direction of Caterpillar i.e., Caterpillar and Active Health go up and down completely randomly.
Pair Corralation between Caterpillar and Active Health
Considering the 90-day investment horizon Caterpillar is expected to generate 6.12 times less return on investment than Active Health. But when comparing it to its historical volatility, Caterpillar is 18.65 times less risky than Active Health. It trades about 0.14 of its potential returns per unit of risk. Active Health Foods is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Active Health Foods on August 26, 2024 and sell it today you would earn a total of 0.00 from holding Active Health Foods or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Caterpillar vs. Active Health Foods
Performance |
| Timeline |
| Caterpillar |
| Active Health Foods |
Caterpillar and Active Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Active Health
The main advantage of trading using opposite Caterpillar and Active Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Active Health 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 Active Health will offset losses from the drop in Active Health's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Active Health vs. Ventana Biotech | Active Health vs. Gold Ent Group | Active Health vs. Profitable Develop | Active Health vs. American Leisure Holdings |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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