Correlation Between Caterpillar and Ameriwest Lithium
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Ameriwest Lithium 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 Ameriwest Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Ameriwest Lithium, you can compare the effects of market volatilities on Caterpillar and Ameriwest Lithium 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 Ameriwest Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Ameriwest Lithium.
Diversification Opportunities for Caterpillar and Ameriwest Lithium
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Ameriwest is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Ameriwest Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriwest Lithium 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 Ameriwest Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriwest Lithium has no effect on the direction of Caterpillar i.e., Caterpillar and Ameriwest Lithium go up and down completely randomly.
Pair Corralation between Caterpillar and Ameriwest Lithium
Considering the 90-day investment horizon Caterpillar is expected to generate 0.45 times more return on investment than Ameriwest Lithium. However, Caterpillar is 2.21 times less risky than Ameriwest Lithium. It trades about 0.15 of its potential returns per unit of risk. Ameriwest Lithium is currently generating about -0.12 per unit of risk. If you would invest 37,963 in Caterpillar on September 2, 2024 and sell it today you would earn a total of 2,648 from holding Caterpillar or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Ameriwest Lithium
Performance |
| Timeline |
| Caterpillar |
| Ameriwest Lithium |
Caterpillar and Ameriwest Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Ameriwest Lithium
The main advantage of trading using opposite Caterpillar and Ameriwest Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Ameriwest Lithium 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 Ameriwest Lithium will offset losses from the drop in Ameriwest Lithium's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Ameriwest Lithium vs. ATT Inc | Ameriwest Lithium vs. Merck Company | Ameriwest Lithium vs. Walt Disney | Ameriwest Lithium vs. Caterpillar |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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