Correlation Between Caterpillar and Direct Digital
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Direct Digital 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 Direct Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Direct Digital Holdings, you can compare the effects of market volatilities on Caterpillar and Direct Digital 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 Direct Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Direct Digital.
Diversification Opportunities for Caterpillar and Direct Digital
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Direct is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Direct Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Digital Holdings 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 Direct Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Digital Holdings has no effect on the direction of Caterpillar i.e., Caterpillar and Direct Digital go up and down completely randomly.
Pair Corralation between Caterpillar and Direct Digital
If you would invest 33,902 in Caterpillar on September 2, 2024 and sell it today you would earn a total of 6,709 from holding Caterpillar or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 1.56% |
| Values | Daily Returns |
Caterpillar vs. Direct Digital Holdings
Performance |
| Timeline |
| Caterpillar |
| Direct Digital Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Direct Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Direct Digital
The main advantage of trading using opposite Caterpillar and Direct Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Direct Digital 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 Direct Digital will offset losses from the drop in Direct Digital's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Direct Digital vs. Direct Digital Holdings | Direct Digital vs. Thayer Ventures Acquisition | Direct Digital vs. Digital Brands Group | Direct Digital vs. Guardforce AI Co |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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