Correlation Between Caterpillar and Austin Engineering
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Austin Engineering 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 Austin Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Austin Engineering Limited, you can compare the effects of market volatilities on Caterpillar and Austin Engineering 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 Austin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Austin Engineering.
Diversification Opportunities for Caterpillar and Austin Engineering
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Austin is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering 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 Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of Caterpillar i.e., Caterpillar and Austin Engineering go up and down completely randomly.
Pair Corralation between Caterpillar and Austin Engineering
Considering the 90-day investment horizon Caterpillar is expected to generate 1.05 times less return on investment than Austin Engineering. But when comparing it to its historical volatility, Caterpillar is 3.03 times less risky than Austin Engineering. It trades about 0.09 of its potential returns per unit of risk. Austin Engineering Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 27.00 in Austin Engineering Limited on August 24, 2024 and sell it today you would earn a total of 3.00 from holding Austin Engineering Limited or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Austin Engineering Limited
Performance |
| Timeline |
| Caterpillar |
| Austin Engineering |
Caterpillar and Austin Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Austin Engineering
The main advantage of trading using opposite Caterpillar and Austin Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Austin Engineering 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 Austin Engineering will offset losses from the drop in Austin Engineering's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Austin Engineering vs. Lion Electric Corp | Austin Engineering vs. Nikola Corp | Austin Engineering vs. Buhler Industries | Austin Engineering vs. Toyota Industries |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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