Correlation Between Caterpillar and Maxwell Resource
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Maxwell Resource 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 Maxwell Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Maxwell Resource, you can compare the effects of market volatilities on Caterpillar and Maxwell Resource 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 Maxwell Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Maxwell Resource.
Diversification Opportunities for Caterpillar and Maxwell Resource
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Caterpillar and Maxwell is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Maxwell Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxwell Resource 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 Maxwell Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxwell Resource has no effect on the direction of Caterpillar i.e., Caterpillar and Maxwell Resource go up and down completely randomly.
Pair Corralation between Caterpillar and Maxwell Resource
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Maxwell Resource. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 22.12 times less risky than Maxwell Resource. The stock trades about -0.12 of its potential returns per unit of risk. The Maxwell Resource is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.90 in Maxwell Resource on January 13, 2025 and sell it today you would lose (1.00) from holding Maxwell Resource or give up 52.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Maxwell Resource
Performance |
| Timeline |
| Caterpillar |
| Maxwell Resource |
Caterpillar and Maxwell Resource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Maxwell Resource
The main advantage of trading using opposite Caterpillar and Maxwell Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Maxwell Resource 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 Maxwell Resource will offset losses from the drop in Maxwell Resource's long position.| Caterpillar vs. Hyster Yale Materials Handling | Caterpillar vs. Columbus McKinnon | Caterpillar vs. AGCO Corporation | Caterpillar vs. Titan International |
| Maxwell Resource vs. CurrentC Power | Maxwell Resource vs. Auddia Inc | Maxwell Resource vs. BASE Inc | Maxwell Resource vs. AnalytixInsight |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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