Correlation Between Caterpillar and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Vanguard Intermediate 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 Vanguard Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Vanguard Intermediate Term Bond, you can compare the effects of market volatilities on Caterpillar and Vanguard Intermediate 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 Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Vanguard Intermediate.
Diversification Opportunities for Caterpillar and Vanguard Intermediate
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Vanguard is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Vanguard Intermediate Term Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Caterpillar i.e., Caterpillar and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between Caterpillar and Vanguard Intermediate
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Vanguard Intermediate. In addition to that, Caterpillar is 4.26 times more volatile than Vanguard Intermediate Term Bond. It trades about -0.08 of its total potential returns per unit of risk. Vanguard Intermediate Term Bond is currently generating about 0.1 per unit of volatility. If you would invest 7,516 in Vanguard Intermediate Term Bond on September 18, 2024 and sell it today you would earn a total of 46.00 from holding Vanguard Intermediate Term Bond or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Vanguard Intermediate Term Bon
Performance |
| Timeline |
| Caterpillar |
| Vanguard Intermediate |
Caterpillar and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Vanguard Intermediate
The main advantage of trading using opposite Caterpillar and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Vanguard Intermediate 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 Vanguard Intermediate will offset losses from the drop in Vanguard Intermediate's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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