Correlation Between Caterpillar and EA Series
Can any of the company-specific risk be diversified away by investing in both Caterpillar and EA Series 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 EA Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and EA Series Trust, you can compare the effects of market volatilities on Caterpillar and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and EA Series.
Diversification Opportunities for Caterpillar and EA Series
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and ECML is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Caterpillar i.e., Caterpillar and EA Series go up and down completely randomly.
Pair Corralation between Caterpillar and EA Series
Considering the 90-day investment horizon Caterpillar is expected to generate 2.0 times less return on investment than EA Series. In addition to that, Caterpillar is 1.87 times more volatile than EA Series Trust. It trades about 0.07 of its total potential returns per unit of risk. EA Series Trust is currently generating about 0.25 per unit of volatility. If you would invest 3,337 in EA Series Trust on August 26, 2024 and sell it today you would earn a total of 237.00 from holding EA Series Trust or generate 7.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. EA Series Trust
Performance |
| Timeline |
| Caterpillar |
| EA Series Trust |
Caterpillar and EA Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and EA Series
The main advantage of trading using opposite Caterpillar and EA Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, EA Series 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 EA Series will offset losses from the drop in EA Series' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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