Correlation Between Caterpillar and MicroSectors Solactive
Can any of the company-specific risk be diversified away by investing in both Caterpillar and MicroSectors Solactive 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 MicroSectors Solactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and MicroSectors Solactive FANG, you can compare the effects of market volatilities on Caterpillar and MicroSectors Solactive 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 MicroSectors Solactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and MicroSectors Solactive.
Diversification Opportunities for Caterpillar and MicroSectors Solactive
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and MicroSectors is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and MicroSectors Solactive FANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Solactive 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 MicroSectors Solactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Solactive has no effect on the direction of Caterpillar i.e., Caterpillar and MicroSectors Solactive go up and down completely randomly.
Pair Corralation between Caterpillar and MicroSectors Solactive
Considering the 90-day investment horizon Caterpillar is expected to generate 0.52 times more return on investment than MicroSectors Solactive. However, Caterpillar is 1.93 times less risky than MicroSectors Solactive. It trades about 0.09 of its potential returns per unit of risk. MicroSectors Solactive FANG is currently generating about -0.11 per unit of risk. If you would invest 39,061 in Caterpillar on August 28, 2024 and sell it today you would earn a total of 1,722 from holding Caterpillar or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. MicroSectors Solactive FANG
Performance |
| Timeline |
| Caterpillar |
| MicroSectors Solactive |
Caterpillar and MicroSectors Solactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and MicroSectors Solactive
The main advantage of trading using opposite Caterpillar and MicroSectors Solactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, MicroSectors Solactive 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 MicroSectors Solactive will offset losses from the drop in MicroSectors Solactive's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. MicroSectors Solactive FANG | MicroSectors Solactive vs. MicroSectors FANG Index |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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