Correlation Between Caterpillar and Pimco Funds
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Pimco Funds 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 Pimco Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Pimco Funds , you can compare the effects of market volatilities on Caterpillar and Pimco Funds 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 Pimco Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Pimco Funds.
Diversification Opportunities for Caterpillar and Pimco Funds
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Pimco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Pimco Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Funds 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 Pimco Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Funds has no effect on the direction of Caterpillar i.e., Caterpillar and Pimco Funds go up and down completely randomly.
Pair Corralation between Caterpillar and Pimco Funds
Considering the 90-day investment horizon Caterpillar is expected to generate 5.48 times more return on investment than Pimco Funds. However, Caterpillar is 5.48 times more volatile than Pimco Funds . It trades about 0.12 of its potential returns per unit of risk. Pimco Funds is currently generating about 0.13 per unit of risk. If you would invest 25,540 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 14,711 from holding Caterpillar or generate 57.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Pimco Funds
Performance |
| Timeline |
| Caterpillar |
| Pimco Funds |
Caterpillar and Pimco Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Pimco Funds
The main advantage of trading using opposite Caterpillar and Pimco Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Pimco Funds 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 Pimco Funds will offset losses from the drop in Pimco Funds' long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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