Correlation Between Caterpillar and Anfield Resources
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Anfield Resources 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 Anfield Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Anfield Resources, you can compare the effects of market volatilities on Caterpillar and Anfield Resources 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 Anfield Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Anfield Resources.
Diversification Opportunities for Caterpillar and Anfield Resources
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Anfield is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Anfield Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anfield Resources 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 Anfield Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anfield Resources has no effect on the direction of Caterpillar i.e., Caterpillar and Anfield Resources go up and down completely randomly.
Pair Corralation between Caterpillar and Anfield Resources
Considering the 90-day investment horizon Caterpillar is expected to generate 0.33 times more return on investment than Anfield Resources. However, Caterpillar is 3.04 times less risky than Anfield Resources. It trades about 0.09 of its potential returns per unit of risk. Anfield Resources is currently generating about -0.04 per unit of risk. If you would invest 39,061 in Caterpillar on August 29, 2024 and sell it today you would earn a total of 1,722 from holding Caterpillar or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Anfield Resources
Performance |
| Timeline |
| Caterpillar |
| Anfield Resources |
Caterpillar and Anfield Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Anfield Resources
The main advantage of trading using opposite Caterpillar and Anfield Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Anfield Resources 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 Anfield Resources will offset losses from the drop in Anfield Resources' 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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