Correlation Between Caterpillar and Dyne Therapeutics
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Dyne Therapeutics 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 Dyne Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Dyne Therapeutics, you can compare the effects of market volatilities on Caterpillar and Dyne Therapeutics 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 Dyne Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Dyne Therapeutics.
Diversification Opportunities for Caterpillar and Dyne Therapeutics
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Dyne is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Dyne Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dyne Therapeutics 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 Dyne Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dyne Therapeutics has no effect on the direction of Caterpillar i.e., Caterpillar and Dyne Therapeutics go up and down completely randomly.
Pair Corralation between Caterpillar and Dyne Therapeutics
Considering the 90-day investment horizon Caterpillar is expected to generate 2.45 times less return on investment than Dyne Therapeutics. But when comparing it to its historical volatility, Caterpillar is 2.89 times less risky than Dyne Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Dyne Therapeutics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,072 in Dyne Therapeutics on August 30, 2024 and sell it today you would earn a total of 2,041 from holding Dyne Therapeutics or generate 190.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Dyne Therapeutics
Performance |
| Timeline |
| Caterpillar |
| Dyne Therapeutics |
Caterpillar and Dyne Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Dyne Therapeutics
The main advantage of trading using opposite Caterpillar and Dyne Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Dyne Therapeutics 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 Dyne Therapeutics will offset losses from the drop in Dyne Therapeutics' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Dyne Therapeutics vs. Stoke Therapeutics | Dyne Therapeutics vs. Pliant Therapeutics | Dyne Therapeutics vs. Cytokinetics | Dyne Therapeutics vs. Revolution Medicines |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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