Correlation Between Caterpillar and Centre Global
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Centre 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 Centre Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Centre Global Infrastructure, you can compare the effects of market volatilities on Caterpillar and Centre 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 Centre Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Centre Global.
Diversification Opportunities for Caterpillar and Centre Global
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Centre is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Centre Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centre Global Infras 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 Centre Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centre Global Infras has no effect on the direction of Caterpillar i.e., Caterpillar and Centre Global go up and down completely randomly.
Pair Corralation between Caterpillar and Centre Global
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Centre Global. In addition to that, Caterpillar is 1.79 times more volatile than Centre Global Infrastructure. It trades about -0.1 of its total potential returns per unit of risk. Centre Global Infrastructure is currently generating about -0.05 per unit of volatility. If you would invest 1,222 in Centre Global Infrastructure on September 13, 2024 and sell it today you would lose (9.00) from holding Centre Global Infrastructure or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caterpillar vs. Centre Global Infrastructure
Performance |
| Timeline |
| Caterpillar |
| Centre Global Infras |
Caterpillar and Centre Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Centre Global
The main advantage of trading using opposite Caterpillar and Centre Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Centre 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 Centre Global will offset losses from the drop in Centre Global's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
| Centre Global vs. Blackrock Conservative Prprdptfinstttnl | Centre Global vs. Allianzgi Diversified Income | Centre Global vs. Elfun Diversified Fund | Centre Global vs. Stone Ridge Diversified |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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