Correlation Between Caterpillar and Captiva Verde
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Captiva Verde 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 Captiva Verde into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Captiva Verde Land, you can compare the effects of market volatilities on Caterpillar and Captiva Verde 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 Captiva Verde. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Captiva Verde.
Diversification Opportunities for Caterpillar and Captiva Verde
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Captiva is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Captiva Verde Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Captiva Verde Land 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 Captiva Verde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Captiva Verde Land has no effect on the direction of Caterpillar i.e., Caterpillar and Captiva Verde go up and down completely randomly.
Pair Corralation between Caterpillar and Captiva Verde
Considering the 90-day investment horizon Caterpillar is expected to generate 26.74 times less return on investment than Captiva Verde. But when comparing it to its historical volatility, Caterpillar is 29.09 times less risky than Captiva Verde. It trades about 0.16 of its potential returns per unit of risk. Captiva Verde Land is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Captiva Verde Land on September 1, 2024 and sell it today you would lose (2.50) from holding Captiva Verde Land or give up 83.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caterpillar vs. Captiva Verde Land
Performance |
| Timeline |
| Caterpillar |
| Captiva Verde Land |
Caterpillar and Captiva Verde Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Captiva Verde
The main advantage of trading using opposite Caterpillar and Captiva Verde positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Captiva Verde 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 Captiva Verde will offset losses from the drop in Captiva Verde's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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