Correlation Between Caterpillar and Azure Holding
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Azure Holding 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 Azure Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Azure Holding Group, you can compare the effects of market volatilities on Caterpillar and Azure Holding 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 Azure Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Azure Holding.
Diversification Opportunities for Caterpillar and Azure Holding
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Azure is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Azure Holding Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Holding Group 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 Azure Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Holding Group has no effect on the direction of Caterpillar i.e., Caterpillar and Azure Holding go up and down completely randomly.
Pair Corralation between Caterpillar and Azure Holding
Considering the 90-day investment horizon Caterpillar is expected to generate 26.15 times less return on investment than Azure Holding. But when comparing it to its historical volatility, Caterpillar is 12.63 times less risky than Azure Holding. It trades about 0.07 of its potential returns per unit of risk. Azure Holding Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Azure Holding Group on August 29, 2024 and sell it today you would earn a total of 1.00 from holding Azure Holding Group or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Azure Holding Group
Performance |
| Timeline |
| Caterpillar |
| Azure Holding Group |
Caterpillar and Azure Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Azure Holding
The main advantage of trading using opposite Caterpillar and Azure Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Azure Holding 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 Azure Holding will offset losses from the drop in Azure Holding's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Azure Holding vs. Alsea SAB de | Azure Holding vs. Marstons PLC | Azure Holding vs. Bagger Daves Burger | Azure Holding vs. Marstons PLC |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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