Correlation Between Caterpillar and Bengal Energy
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Bengal Energy 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 Bengal Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Bengal Energy, you can compare the effects of market volatilities on Caterpillar and Bengal Energy 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 Bengal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Bengal Energy.
Diversification Opportunities for Caterpillar and Bengal Energy
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Bengal is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Bengal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengal Energy 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 Bengal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengal Energy has no effect on the direction of Caterpillar i.e., Caterpillar and Bengal Energy go up and down completely randomly.
Pair Corralation between Caterpillar and Bengal Energy
Considering the 90-day investment horizon Caterpillar is expected to generate 0.21 times more return on investment than Bengal Energy. However, Caterpillar is 4.86 times less risky than Bengal Energy. It trades about 0.06 of its potential returns per unit of risk. Bengal Energy is currently generating about -0.29 per unit of risk. If you would invest 38,706 in Caterpillar on August 25, 2024 and sell it today you would earn a total of 1,043 from holding Caterpillar or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Caterpillar vs. Bengal Energy
Performance |
| Timeline |
| Caterpillar |
| Bengal Energy |
Caterpillar and Bengal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Bengal Energy
The main advantage of trading using opposite Caterpillar and Bengal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Bengal Energy 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 Bengal Energy will offset losses from the drop in Bengal Energy's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Bengal Energy vs. Petroleo Brasileiro Petrobras | Bengal Energy vs. Equinor ASA ADR | Bengal Energy vs. Eni SpA ADR | Bengal Energy vs. YPF Sociedad Anonima |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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