Correlation Between Caterpillar and Catalyst Metals
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Catalyst Metals 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 Catalyst Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Catalyst Metals Limited, you can compare the effects of market volatilities on Caterpillar and Catalyst Metals 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 Catalyst Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Catalyst Metals.
Diversification Opportunities for Caterpillar and Catalyst Metals
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Catalyst is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Catalyst Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Caterpillar i.e., Caterpillar and Catalyst Metals go up and down completely randomly.
Pair Corralation between Caterpillar and Catalyst Metals
Considering the 90-day investment horizon Caterpillar is expected to generate 3.55 times less return on investment than Catalyst Metals. But when comparing it to its historical volatility, Caterpillar is 3.77 times less risky than Catalyst Metals. It trades about 0.12 of its potential returns per unit of risk. Catalyst Metals Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 59.00 in Catalyst Metals Limited on August 27, 2024 and sell it today you would earn a total of 141.00 from holding Catalyst Metals Limited or generate 238.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Catalyst Metals Limited
Performance |
| Timeline |
| Caterpillar |
| Catalyst Metals |
Caterpillar and Catalyst Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Catalyst Metals
The main advantage of trading using opposite Caterpillar and Catalyst Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Catalyst Metals 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 Catalyst Metals will offset losses from the drop in Catalyst Metals' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Catalyst Metals vs. Legacy Education | Catalyst Metals vs. NVIDIA | Catalyst Metals vs. Apple Inc | Catalyst Metals vs. Microsoft |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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