Correlation Between Caterpillar and Caredx
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Caredx 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 Caredx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Caredx Inc, you can compare the effects of market volatilities on Caterpillar and Caredx 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 Caredx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Caredx.
Diversification Opportunities for Caterpillar and Caredx
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Caredx is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Caredx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caredx Inc 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 Caredx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caredx Inc has no effect on the direction of Caterpillar i.e., Caterpillar and Caredx go up and down completely randomly.
Pair Corralation between Caterpillar and Caredx
Considering the 90-day investment horizon Caterpillar is expected to generate 2.53 times less return on investment than Caredx. But when comparing it to its historical volatility, Caterpillar is 3.05 times less risky than Caredx. It trades about 0.1 of its potential returns per unit of risk. Caredx Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 806.00 in Caredx Inc on August 31, 2024 and sell it today you would earn a total of 1,648 from holding Caredx Inc or generate 204.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Caredx Inc
Performance |
| Timeline |
| Caterpillar |
| Caredx Inc |
Caterpillar and Caredx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Caredx
The main advantage of trading using opposite Caterpillar and Caredx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Caredx 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 Caredx will offset losses from the drop in Caredx's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
| Caredx vs. Castle Biosciences | Caredx vs. Twist Bioscience Corp | Caredx vs. Biodesix | Caredx vs. Natera Inc |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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