Correlation Between Caterpillar and DigiMax Global
Can any of the company-specific risk be diversified away by investing in both Caterpillar and DigiMax Global 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 DigiMax Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and DigiMax Global, you can compare the effects of market volatilities on Caterpillar and DigiMax Global 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 DigiMax Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and DigiMax Global.
Diversification Opportunities for Caterpillar and DigiMax Global
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and DigiMax is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and DigiMax Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigiMax Global 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 DigiMax Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigiMax Global has no effect on the direction of Caterpillar i.e., Caterpillar and DigiMax Global go up and down completely randomly.
Pair Corralation between Caterpillar and DigiMax Global
Considering the 90-day investment horizon Caterpillar is expected to generate 0.13 times more return on investment than DigiMax Global. However, Caterpillar is 7.41 times less risky than DigiMax Global. It trades about 0.1 of its potential returns per unit of risk. DigiMax Global is currently generating about -0.03 per unit of risk. If you would invest 32,883 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 7,728 from holding Caterpillar or generate 23.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. DigiMax Global
Performance |
| Timeline |
| Caterpillar |
| DigiMax Global |
Caterpillar and DigiMax Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and DigiMax Global
The main advantage of trading using opposite Caterpillar and DigiMax Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, DigiMax Global 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 DigiMax Global will offset losses from the drop in DigiMax Global's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| DigiMax Global vs. Morgan Stanley | DigiMax Global vs. Goldman Sachs Group | DigiMax Global vs. HUMANA INC | DigiMax Global vs. SCOR PK |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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