Correlation Between Caterpillar and VictoryShares 500
Can any of the company-specific risk be diversified away by investing in both Caterpillar and VictoryShares 500 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 VictoryShares 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and VictoryShares 500 Volatility, you can compare the effects of market volatilities on Caterpillar and VictoryShares 500 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 VictoryShares 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and VictoryShares 500.
Diversification Opportunities for Caterpillar and VictoryShares 500
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and VictoryShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and VictoryShares 500 Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 500 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 VictoryShares 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares 500 has no effect on the direction of Caterpillar i.e., Caterpillar and VictoryShares 500 go up and down completely randomly.
Pair Corralation between Caterpillar and VictoryShares 500
Considering the 90-day investment horizon Caterpillar is expected to generate 1.19 times less return on investment than VictoryShares 500. In addition to that, Caterpillar is 2.91 times more volatile than VictoryShares 500 Volatility. It trades about 0.09 of its total potential returns per unit of risk. VictoryShares 500 Volatility is currently generating about 0.31 per unit of volatility. If you would invest 8,601 in VictoryShares 500 Volatility on August 30, 2024 and sell it today you would earn a total of 486.00 from holding VictoryShares 500 Volatility or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. VictoryShares 500 Volatility
Performance |
| Timeline |
| Caterpillar |
| VictoryShares 500 |
Caterpillar and VictoryShares 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and VictoryShares 500
The main advantage of trading using opposite Caterpillar and VictoryShares 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, VictoryShares 500 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 VictoryShares 500 will offset losses from the drop in VictoryShares 500's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| VictoryShares 500 vs. JPMorgan BetaBuilders International | VictoryShares 500 vs. JPMorgan Core Plus | VictoryShares 500 vs. JPMorgan BetaBuilders Canada | VictoryShares 500 vs. JPMorgan Emerging Markets |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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