Correlation Between Caterpillar and Global X
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Global X MSCI, you can compare the effects of market volatilities on Caterpillar and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Global X.
Diversification Opportunities for Caterpillar and Global X
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Caterpillar and Global is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of Caterpillar i.e., Caterpillar and Global X go up and down completely randomly.
Pair Corralation between Caterpillar and Global X
Considering the 90-day investment horizon Caterpillar is expected to generate 1.6 times less return on investment than Global X. In addition to that, Caterpillar is 1.83 times more volatile than Global X MSCI. It trades about 0.16 of its total potential returns per unit of risk. Global X MSCI is currently generating about 0.48 per unit of volatility. If you would invest 7,291 in Global X MSCI on September 1, 2024 and sell it today you would earn a total of 1,061 from holding Global X MSCI or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caterpillar vs. Global X MSCI
Performance |
| Timeline |
| Caterpillar |
| Global X MSCI |
Caterpillar and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Global X
The main advantage of trading using opposite Caterpillar and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Global X vs. Global X MSCI | Global X vs. iShares MSCI Peru | Global X vs. iShares MSCI Chile | Global X vs. Global X MSCI |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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