Correlation Between Caterpillar and AdvisorShares Focused
Can any of the company-specific risk be diversified away by investing in both Caterpillar and AdvisorShares Focused 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 AdvisorShares Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and AdvisorShares Focused Equity, you can compare the effects of market volatilities on Caterpillar and AdvisorShares Focused 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 AdvisorShares Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and AdvisorShares Focused.
Diversification Opportunities for Caterpillar and AdvisorShares Focused
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and AdvisorShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and AdvisorShares Focused Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Focused 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 AdvisorShares Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Focused has no effect on the direction of Caterpillar i.e., Caterpillar and AdvisorShares Focused go up and down completely randomly.
Pair Corralation between Caterpillar and AdvisorShares Focused
Considering the 90-day investment horizon Caterpillar is expected to generate 2.23 times less return on investment than AdvisorShares Focused. In addition to that, Caterpillar is 2.54 times more volatile than AdvisorShares Focused Equity. It trades about 0.05 of its total potential returns per unit of risk. AdvisorShares Focused Equity is currently generating about 0.26 per unit of volatility. If you would invest 6,490 in AdvisorShares Focused Equity on November 9, 2024 and sell it today you would earn a total of 296.00 from holding AdvisorShares Focused Equity or generate 4.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. AdvisorShares Focused Equity
Performance |
| Timeline |
| Caterpillar |
| AdvisorShares Focused |
Caterpillar and AdvisorShares Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and AdvisorShares Focused
The main advantage of trading using opposite Caterpillar and AdvisorShares Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, AdvisorShares Focused 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 AdvisorShares Focused will offset losses from the drop in AdvisorShares Focused'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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |