Correlation Between Caterpillar and American Manganese
Can any of the company-specific risk be diversified away by investing in both Caterpillar and American Manganese 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 American Manganese into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and American Manganese, you can compare the effects of market volatilities on Caterpillar and American Manganese 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 American Manganese. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and American Manganese.
Diversification Opportunities for Caterpillar and American Manganese
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and American is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and American Manganese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Manganese 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 American Manganese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Manganese has no effect on the direction of Caterpillar i.e., Caterpillar and American Manganese go up and down completely randomly.
Pair Corralation between Caterpillar and American Manganese
Considering the 90-day investment horizon Caterpillar is expected to generate 2.41 times less return on investment than American Manganese. But when comparing it to its historical volatility, Caterpillar is 3.44 times less risky than American Manganese. It trades about 0.07 of its potential returns per unit of risk. American Manganese is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8.10 in American Manganese on August 26, 2024 and sell it today you would earn a total of 0.50 from holding American Manganese or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. American Manganese
Performance |
| Timeline |
| Caterpillar |
| American Manganese |
Caterpillar and American Manganese Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and American Manganese
The main advantage of trading using opposite Caterpillar and American Manganese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, American Manganese 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 American Manganese will offset losses from the drop in American Manganese's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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