Correlation Between Caterpillar and Bluebird Bio
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Bluebird Bio 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 Bluebird Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Bluebird bio, you can compare the effects of market volatilities on Caterpillar and Bluebird Bio 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 Bluebird Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Bluebird Bio.
Diversification Opportunities for Caterpillar and Bluebird Bio
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Bluebird is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Bluebird bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluebird bio 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 Bluebird Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluebird bio has no effect on the direction of Caterpillar i.e., Caterpillar and Bluebird Bio go up and down completely randomly.
Pair Corralation between Caterpillar and Bluebird Bio
Considering the 90-day investment horizon Caterpillar is expected to generate 0.38 times more return on investment than Bluebird Bio. However, Caterpillar is 2.66 times less risky than Bluebird Bio. It trades about 0.13 of its potential returns per unit of risk. Bluebird bio is currently generating about -0.15 per unit of risk. If you would invest 37,924 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 2,446 from holding Caterpillar or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Bluebird bio
Performance |
| Timeline |
| Caterpillar |
| Bluebird bio |
Caterpillar and Bluebird Bio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Bluebird Bio
The main advantage of trading using opposite Caterpillar and Bluebird Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Bluebird Bio 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 Bluebird Bio will offset losses from the drop in Bluebird Bio's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
| Bluebird Bio vs. Mersana Therapeutics | Bluebird Bio vs. Zentalis Pharmaceuticals Llc | Bluebird Bio vs. Y mAbs Therapeutics | Bluebird Bio vs. Travere Therapeutics |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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