Correlation Between Caterpillar and Biodesix
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Biodesix 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 Biodesix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Biodesix, you can compare the effects of market volatilities on Caterpillar and Biodesix 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 Biodesix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Biodesix.
Diversification Opportunities for Caterpillar and Biodesix
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Biodesix is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Biodesix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biodesix 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 Biodesix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biodesix has no effect on the direction of Caterpillar i.e., Caterpillar and Biodesix go up and down completely randomly.
Pair Corralation between Caterpillar and Biodesix
Considering the 90-day investment horizon Caterpillar is expected to generate 0.36 times more return on investment than Biodesix. However, Caterpillar is 2.8 times less risky than Biodesix. It trades about 0.07 of its potential returns per unit of risk. Biodesix is currently generating about 0.02 per unit of risk. If you would invest 22,430 in Caterpillar on August 24, 2024 and sell it today you would earn a total of 16,529 from holding Caterpillar or generate 73.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Biodesix
Performance |
| Timeline |
| Caterpillar |
| Biodesix |
Caterpillar and Biodesix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Biodesix
The main advantage of trading using opposite Caterpillar and Biodesix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Biodesix 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 Biodesix will offset losses from the drop in Biodesix's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Biodesix vs. Aclaris Therapeutics | Biodesix vs. Castle Biosciences | Biodesix vs. Prenetics Global | Biodesix vs. DarioHealth 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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