Correlation Between Caterpillar and CPSI Old
Can any of the company-specific risk be diversified away by investing in both Caterpillar and CPSI Old 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 CPSI Old into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and CPSI Old, you can compare the effects of market volatilities on Caterpillar and CPSI Old 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 CPSI Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and CPSI Old.
Diversification Opportunities for Caterpillar and CPSI Old
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and CPSI is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and CPSI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPSI Old 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 CPSI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPSI Old has no effect on the direction of Caterpillar i.e., Caterpillar and CPSI Old go up and down completely randomly.
Pair Corralation between Caterpillar and CPSI Old
Considering the 90-day investment horizon Caterpillar is expected to generate 1.36 times less return on investment than CPSI Old. In addition to that, Caterpillar is 1.8 times more volatile than CPSI Old. It trades about 0.1 of its total potential returns per unit of risk. CPSI Old is currently generating about 0.24 per unit of volatility. If you would invest 2,451 in CPSI Old on August 28, 2024 and sell it today you would earn a total of 82.00 from holding CPSI Old or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.24% |
| Values | Daily Returns |
Caterpillar vs. CPSI Old
Performance |
| Timeline |
| Caterpillar |
| CPSI Old |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and CPSI Old Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and CPSI Old
The main advantage of trading using opposite Caterpillar and CPSI Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, CPSI Old 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 CPSI Old will offset losses from the drop in CPSI Old's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| CPSI Old vs. National Research Corp | CPSI Old vs. Forian Inc | CPSI Old vs. HealthEquity | CPSI Old vs. Health Catalyst |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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