Correlation Between Caterpillar and Boston Partners
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Boston Partners 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 Boston Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Boston Partners Global, you can compare the effects of market volatilities on Caterpillar and Boston Partners 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 Boston Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Boston Partners.
Diversification Opportunities for Caterpillar and Boston Partners
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Boston is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Boston Partners Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Global 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 Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Global has no effect on the direction of Caterpillar i.e., Caterpillar and Boston Partners go up and down completely randomly.
Pair Corralation between Caterpillar and Boston Partners
Considering the 90-day investment horizon Caterpillar is expected to generate 2.08 times more return on investment than Boston Partners. However, Caterpillar is 2.08 times more volatile than Boston Partners Global. It trades about 0.07 of its potential returns per unit of risk. Boston Partners Global is currently generating about -0.07 per unit of risk. If you would invest 34,383 in Caterpillar on August 25, 2024 and sell it today you would earn a total of 5,366 from holding Caterpillar or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Caterpillar vs. Boston Partners Global
Performance |
| Timeline |
| Caterpillar |
| Boston Partners Global |
Caterpillar and Boston Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Boston Partners
The main advantage of trading using opposite Caterpillar and Boston Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Boston Partners 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 Boston Partners will offset losses from the drop in Boston Partners' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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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