Correlation Between Caterpillar and SPDR Galaxy
Can any of the company-specific risk be diversified away by investing in both Caterpillar and SPDR Galaxy 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 SPDR Galaxy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and SPDR Galaxy Digital, you can compare the effects of market volatilities on Caterpillar and SPDR Galaxy 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 SPDR Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and SPDR Galaxy.
Diversification Opportunities for Caterpillar and SPDR Galaxy
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and SPDR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and SPDR Galaxy Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Digital 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Digital has no effect on the direction of Caterpillar i.e., Caterpillar and SPDR Galaxy go up and down completely randomly.
Pair Corralation between Caterpillar and SPDR Galaxy
Considering the 90-day investment horizon Caterpillar is expected to generate 0.35 times more return on investment than SPDR Galaxy. However, Caterpillar is 2.89 times less risky than SPDR Galaxy. It trades about -0.04 of its potential returns per unit of risk. SPDR Galaxy Digital is currently generating about -0.03 per unit of risk. If you would invest 39,301 in Caterpillar on September 13, 2024 and sell it today you would lose (462.00) from holding Caterpillar or give up 1.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caterpillar vs. SPDR Galaxy Digital
Performance |
| Timeline |
| Caterpillar |
| SPDR Galaxy Digital |
Caterpillar and SPDR Galaxy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and SPDR Galaxy
The main advantage of trading using opposite Caterpillar and SPDR Galaxy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, SPDR Galaxy 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 SPDR Galaxy will offset losses from the drop in SPDR Galaxy's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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