Correlation Between Caterpillar and BIOLASE
Can any of the company-specific risk be diversified away by investing in both Caterpillar and BIOLASE 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 BIOLASE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and BIOLASE, you can compare the effects of market volatilities on Caterpillar and BIOLASE 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 BIOLASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and BIOLASE.
Diversification Opportunities for Caterpillar and BIOLASE
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and BIOLASE is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and BIOLASE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIOLASE 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 BIOLASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIOLASE has no effect on the direction of Caterpillar i.e., Caterpillar and BIOLASE go up and down completely randomly.
Pair Corralation between Caterpillar and BIOLASE
If you would invest 37,620 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 2,991 from holding Caterpillar or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Caterpillar vs. BIOLASE
Performance |
| Timeline |
| Caterpillar |
| BIOLASE |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and BIOLASE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and BIOLASE
The main advantage of trading using opposite Caterpillar and BIOLASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, BIOLASE 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 BIOLASE will offset losses from the drop in BIOLASE's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| BIOLASE vs. Bone Biologics Corp | BIOLASE vs. Bluejay Diagnostics | BIOLASE vs. Nuwellis | BIOLASE vs. Heart Test Laboratories |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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