Correlation Between Caterpillar and APAC Resources
Can any of the company-specific risk be diversified away by investing in both Caterpillar and APAC 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 APAC Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and APAC Resources Limited, you can compare the effects of market volatilities on Caterpillar and APAC 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 APAC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and APAC Resources.
Diversification Opportunities for Caterpillar and APAC Resources
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Caterpillar and APAC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and APAC Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APAC 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 APAC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APAC Resources has no effect on the direction of Caterpillar i.e., Caterpillar and APAC Resources go up and down completely randomly.
Pair Corralation between Caterpillar and APAC Resources
If you would invest 37,620 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 2,991 from holding Caterpillar or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 71.43% |
| Values | Daily Returns |
Caterpillar vs. APAC Resources Limited
Performance |
| Timeline |
| Caterpillar |
| APAC Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Caterpillar and APAC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and APAC Resources
The main advantage of trading using opposite Caterpillar and APAC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, APAC 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 APAC Resources will offset losses from the drop in APAC Resources' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| APAC Resources vs. ABS CBN Holdings | APAC Resources vs. Ameritrust Corp | APAC Resources vs. Armada Mercantile | APAC Resources vs. Arcane Crypto AB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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