Correlation Between Caterpillar and Capital Group
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Capital Group 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 Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Capital Group International, you can compare the effects of market volatilities on Caterpillar and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Capital Group.
Diversification Opportunities for Caterpillar and Capital Group
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Caterpillar and Capital is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Capital Group International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Intern 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Intern has no effect on the direction of Caterpillar i.e., Caterpillar and Capital Group go up and down completely randomly.
Pair Corralation between Caterpillar and Capital Group
Considering the 90-day investment horizon Caterpillar is expected to generate 1.99 times more return on investment than Capital Group. However, Caterpillar is 1.99 times more volatile than Capital Group International. It trades about 0.06 of its potential returns per unit of risk. Capital Group International is currently generating about 0.02 per unit of risk. If you would invest 23,126 in Caterpillar on November 9, 2024 and sell it today you would earn a total of 13,419 from holding Caterpillar or generate 58.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.24% |
| Values | Daily Returns |
Caterpillar vs. Capital Group International
Performance |
| Timeline |
| Caterpillar |
| Capital Group Intern |
Caterpillar and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Capital Group
The main advantage of trading using opposite Caterpillar and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Capital Group vs. Davis Select International | Capital Group vs. Tidal ETF Trust | Capital Group vs. Principal Value ETF | Capital Group vs. WisdomTree 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 Stocks Directory module to find actively traded stocks across global markets.
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