Correlation Between Caterpillar and Ocean Park
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Ocean Park 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 Ocean Park into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Ocean Park High, you can compare the effects of market volatilities on Caterpillar and Ocean Park 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 Ocean Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Ocean Park.
Diversification Opportunities for Caterpillar and Ocean Park
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Ocean is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Ocean Park High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Park High 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 Ocean Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Park High has no effect on the direction of Caterpillar i.e., Caterpillar and Ocean Park go up and down completely randomly.
Pair Corralation between Caterpillar and Ocean Park
Considering the 90-day investment horizon Caterpillar is expected to generate 7.48 times more return on investment than Ocean Park. However, Caterpillar is 7.48 times more volatile than Ocean Park High. It trades about 0.12 of its potential returns per unit of risk. Ocean Park High is currently generating about 0.14 per unit of risk. If you would invest 25,271 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 14,478 from holding Caterpillar or generate 57.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 39.11% |
| Values | Daily Returns |
Caterpillar vs. Ocean Park High
Performance |
| Timeline |
| Caterpillar |
| Ocean Park High |
Caterpillar and Ocean Park Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Ocean Park
The main advantage of trading using opposite Caterpillar and Ocean Park positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Ocean Park 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 Ocean Park will offset losses from the drop in Ocean Park's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Ocean Park vs. BondBloxx ETF Trust | Ocean Park vs. Virtus ETF Trust | Ocean Park vs. Virtus ETF Trust | Ocean Park vs. iShares JP Morgan |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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