Correlation Between Caterpillar and Dreyfus Diversified
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Dreyfus Diversified 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 Dreyfus Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Dreyfus Diversified International, you can compare the effects of market volatilities on Caterpillar and Dreyfus Diversified 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 Dreyfus Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Dreyfus Diversified.
Diversification Opportunities for Caterpillar and Dreyfus Diversified
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Caterpillar and Dreyfus is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Dreyfus Diversified Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Diversified 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 Dreyfus Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Diversified has no effect on the direction of Caterpillar i.e., Caterpillar and Dreyfus Diversified go up and down completely randomly.
Pair Corralation between Caterpillar and Dreyfus Diversified
Considering the 90-day investment horizon Caterpillar is expected to generate 2.69 times more return on investment than Dreyfus Diversified. However, Caterpillar is 2.69 times more volatile than Dreyfus Diversified International. It trades about 0.05 of its potential returns per unit of risk. Dreyfus Diversified International is currently generating about 0.09 per unit of risk. If you would invest 31,722 in Caterpillar on November 4, 2024 and sell it today you would earn a total of 5,422 from holding Caterpillar or generate 17.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 49.39% |
| Values | Daily Returns |
Caterpillar vs. Dreyfus Diversified Internatio
Performance |
| Timeline |
| Caterpillar |
| Dreyfus Diversified |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Dreyfus Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Dreyfus Diversified
The main advantage of trading using opposite Caterpillar and Dreyfus Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Dreyfus Diversified 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 Dreyfus Diversified will offset losses from the drop in Dreyfus Diversified's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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