Correlation Between Caterpillar and The Brown
Can any of the company-specific risk be diversified away by investing in both Caterpillar and The Brown 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 The Brown into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and The Brown Capital, you can compare the effects of market volatilities on Caterpillar and The Brown 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 The Brown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and The Brown.
Diversification Opportunities for Caterpillar and The Brown
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and The is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and The Brown Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Capital 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 The Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Capital has no effect on the direction of Caterpillar i.e., Caterpillar and The Brown go up and down completely randomly.
Pair Corralation between Caterpillar and The Brown
If you would invest 37,652 in Caterpillar on September 4, 2024 and sell it today you would earn a total of 2,599 from holding Caterpillar or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Caterpillar vs. The Brown Capital
Performance |
| Timeline |
| Caterpillar |
| Brown Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and The Brown Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and The Brown
The main advantage of trading using opposite Caterpillar and The Brown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, The Brown 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 The Brown will offset losses from the drop in The Brown's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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