Correlation Between Caterpillar and Aldeyra
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Aldeyra 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 Aldeyra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Aldeyra, you can compare the effects of market volatilities on Caterpillar and Aldeyra 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 Aldeyra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Aldeyra.
Diversification Opportunities for Caterpillar and Aldeyra
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Aldeyra is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra 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 Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of Caterpillar i.e., Caterpillar and Aldeyra go up and down completely randomly.
Pair Corralation between Caterpillar and Aldeyra
Considering the 90-day investment horizon Caterpillar is expected to generate 0.26 times more return on investment than Aldeyra. However, Caterpillar is 3.79 times less risky than Aldeyra. It trades about 0.11 of its potential returns per unit of risk. Aldeyra is currently generating about 0.01 per unit of risk. If you would invest 20,498 in Caterpillar on August 26, 2024 and sell it today you would earn a total of 19,251 from holding Caterpillar or generate 93.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Aldeyra
Performance |
| Timeline |
| Caterpillar |
| Aldeyra |
Caterpillar and Aldeyra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Aldeyra
The main advantage of trading using opposite Caterpillar and Aldeyra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Aldeyra 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 Aldeyra will offset losses from the drop in Aldeyra's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Aldeyra vs. Tarsus Pharmaceuticals | Aldeyra vs. Travere Therapeutics | Aldeyra vs. Eton Pharmaceuticals | Aldeyra vs. Viridian Therapeutics |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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