Correlation Between Caterpillar and Innovator Laddered
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Innovator Laddered 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 Innovator Laddered into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Innovator Laddered Allocation, you can compare the effects of market volatilities on Caterpillar and Innovator Laddered 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 Innovator Laddered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Innovator Laddered.
Diversification Opportunities for Caterpillar and Innovator Laddered
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Innovator is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Innovator Laddered Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Laddered 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 Innovator Laddered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Laddered has no effect on the direction of Caterpillar i.e., Caterpillar and Innovator Laddered go up and down completely randomly.
Pair Corralation between Caterpillar and Innovator Laddered
Considering the 90-day investment horizon Caterpillar is expected to generate 8.38 times more return on investment than Innovator Laddered. However, Caterpillar is 8.38 times more volatile than Innovator Laddered Allocation. It trades about 0.07 of its potential returns per unit of risk. Innovator Laddered Allocation is currently generating about 0.21 per unit of risk. If you would invest 38,597 in Caterpillar on August 26, 2024 and sell it today you would earn a total of 1,152 from holding Caterpillar or generate 2.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Innovator Laddered Allocation
Performance |
| Timeline |
| Caterpillar |
| Innovator Laddered |
Caterpillar and Innovator Laddered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Innovator Laddered
The main advantage of trading using opposite Caterpillar and Innovator Laddered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Innovator Laddered 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 Innovator Laddered will offset losses from the drop in Innovator Laddered's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Innovator Laddered vs. First Trust Cboe | Innovator Laddered vs. FT Cboe Vest | Innovator Laddered vs. Innovator SP 500 | Innovator Laddered vs. FT Cboe Vest |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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