Correlation Between Caterpillar and Commander Resources
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Commander Resources 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 Commander Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Commander Resources, you can compare the effects of market volatilities on Caterpillar and Commander Resources 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 Commander Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Commander Resources.
Diversification Opportunities for Caterpillar and Commander Resources
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Commander is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources 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 Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of Caterpillar i.e., Caterpillar and Commander Resources go up and down completely randomly.
Pair Corralation between Caterpillar and Commander Resources
Considering the 90-day investment horizon Caterpillar is expected to generate 2.23 times less return on investment than Commander Resources. But when comparing it to its historical volatility, Caterpillar is 4.91 times less risky than Commander Resources. It trades about 0.07 of its potential returns per unit of risk. Commander Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Commander Resources on September 3, 2024 and sell it today you would lose (2.00) from holding Commander Resources or give up 28.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Caterpillar vs. Commander Resources
Performance |
| Timeline |
| Caterpillar |
| Commander Resources |
Caterpillar and Commander Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Commander Resources
The main advantage of trading using opposite Caterpillar and Commander Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Commander Resources 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 Commander Resources will offset losses from the drop in Commander Resources' long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| Commander Resources vs. Themac Resources Group | Commander Resources vs. East Africa Metals | Commander Resources vs. Forsys Metals Corp | Commander Resources vs. American CuMo Mining |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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