Correlation Between Caterpillar and Cascadero Copper
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Cascadero Copper 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 Cascadero Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Cascadero Copper, you can compare the effects of market volatilities on Caterpillar and Cascadero Copper 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 Cascadero Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Cascadero Copper.
Diversification Opportunities for Caterpillar and Cascadero Copper
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Caterpillar and Cascadero is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Cascadero Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cascadero Copper 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 Cascadero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cascadero Copper has no effect on the direction of Caterpillar i.e., Caterpillar and Cascadero Copper go up and down completely randomly.
Pair Corralation between Caterpillar and Cascadero Copper
Considering the 90-day investment horizon Caterpillar is expected to generate 43.11 times less return on investment than Cascadero Copper. But when comparing it to its historical volatility, Caterpillar is 38.66 times less risky than Cascadero Copper. It trades about 0.15 of its potential returns per unit of risk. Cascadero Copper is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1.20 in Cascadero Copper on September 3, 2024 and sell it today you would lose (0.21) from holding Cascadero Copper or give up 17.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Caterpillar vs. Cascadero Copper
Performance |
| Timeline |
| Caterpillar |
| Cascadero Copper |
Caterpillar and Cascadero Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Cascadero Copper
The main advantage of trading using opposite Caterpillar and Cascadero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Cascadero Copper 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 Cascadero Copper will offset losses from the drop in Cascadero Copper's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| Cascadero Copper vs. Qubec Nickel Corp | Cascadero Copper vs. IGO Limited | Cascadero Copper vs. Avarone Metals | Cascadero Copper vs. Adriatic Metals PLC |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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