Correlation Between Caterpillar and BNY Mellon
Can any of the company-specific risk be diversified away by investing in both Caterpillar and BNY Mellon 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 BNY Mellon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and BNY Mellon Core, you can compare the effects of market volatilities on Caterpillar and BNY Mellon 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 BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and BNY Mellon.
Diversification Opportunities for Caterpillar and BNY Mellon
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and BNY is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and BNY Mellon Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon Core 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 BNY Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNY Mellon Core has no effect on the direction of Caterpillar i.e., Caterpillar and BNY Mellon go up and down completely randomly.
Pair Corralation between Caterpillar and BNY Mellon
Considering the 90-day investment horizon Caterpillar is expected to generate 6.81 times more return on investment than BNY Mellon. However, Caterpillar is 6.81 times more volatile than BNY Mellon Core. It trades about 0.16 of its potential returns per unit of risk. BNY Mellon Core is currently generating about 0.14 per unit of risk. 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 | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caterpillar vs. BNY Mellon Core
Performance |
| Timeline |
| Caterpillar |
| BNY Mellon Core |
Caterpillar and BNY Mellon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and BNY Mellon
The main advantage of trading using opposite Caterpillar and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, BNY Mellon 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 BNY Mellon will offset losses from the drop in BNY Mellon's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| BNY Mellon vs. BNY Mellon Large | BNY Mellon vs. BNY Mellon International | BNY Mellon vs. BNY Mellon High | BNY Mellon vs. BNY Mellon ETF |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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