Correlation Between Caterpillar and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Franklin Templeton 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 Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Franklin Templeton ETF, you can compare the effects of market volatilities on Caterpillar and Franklin Templeton 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 Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Franklin Templeton.
Diversification Opportunities for Caterpillar and Franklin Templeton
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF 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 Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Caterpillar i.e., Caterpillar and Franklin Templeton go up and down completely randomly.
Pair Corralation between Caterpillar and Franklin Templeton
Considering the 90-day investment horizon Caterpillar is expected to generate 2.3 times more return on investment than Franklin Templeton. However, Caterpillar is 2.3 times more volatile than Franklin Templeton ETF. It trades about 0.03 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about -0.14 per unit of risk. If you would invest 38,573 in Caterpillar on August 24, 2024 and sell it today you would earn a total of 386.00 from holding Caterpillar or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Franklin Templeton ETF
Performance |
| Timeline |
| Caterpillar |
| Franklin Templeton ETF |
Caterpillar and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Franklin Templeton
The main advantage of trading using opposite Caterpillar and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Franklin Templeton 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 Franklin Templeton will offset losses from the drop in Franklin Templeton's long position.| Caterpillar vs. Small Cap Core | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Mutual Of America | Caterpillar vs. Ep Emerging Markets |
| Franklin Templeton vs. iShares International Developed | Franklin Templeton vs. iShares MSCI Emerging | Franklin Templeton vs. iShares MSCI Frontier | Franklin Templeton vs. iShares MSCI Emerging |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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