Correlation Between Caterpillar and Northern Institutional
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Northern Institutional 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 Northern Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Northern Institutional Funds, you can compare the effects of market volatilities on Caterpillar and Northern Institutional 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 Northern Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Northern Institutional.
Diversification Opportunities for Caterpillar and Northern Institutional
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Northern is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Northern Institutional Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Institutional 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 Northern Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Institutional has no effect on the direction of Caterpillar i.e., Caterpillar and Northern Institutional go up and down completely randomly.
Pair Corralation between Caterpillar and Northern Institutional
If you would invest 38,751 in Caterpillar on August 30, 2024 and sell it today you would earn a total of 1,619 from holding Caterpillar or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Caterpillar vs. Northern Institutional Funds
Performance |
| Timeline |
| Caterpillar |
| Northern Institutional |
Caterpillar and Northern Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Northern Institutional
The main advantage of trading using opposite Caterpillar and Northern Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Northern Institutional 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 Northern Institutional will offset losses from the drop in Northern Institutional's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Northern Institutional vs. Omni Small Cap Value | Northern Institutional vs. Qs Growth Fund | Northern Institutional vs. Nasdaq 100 Index Fund | Northern Institutional vs. Ab Value Fund |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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