Correlation Between Caterpillar and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Invesco SP 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 Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Invesco SP MidCap, you can compare the effects of market volatilities on Caterpillar and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Invesco SP.
Diversification Opportunities for Caterpillar and Invesco SP
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP MidCap has no effect on the direction of Caterpillar i.e., Caterpillar and Invesco SP go up and down completely randomly.
Pair Corralation between Caterpillar and Invesco SP
Considering the 90-day investment horizon Caterpillar is expected to generate 1.54 times less return on investment than Invesco SP. In addition to that, Caterpillar is 1.9 times more volatile than Invesco SP MidCap. It trades about 0.07 of its total potential returns per unit of risk. Invesco SP MidCap is currently generating about 0.2 per unit of volatility. If you would invest 9,991 in Invesco SP MidCap on August 26, 2024 and sell it today you would earn a total of 539.00 from holding Invesco SP MidCap or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Invesco SP MidCap
Performance |
| Timeline |
| Caterpillar |
| Invesco SP MidCap |
Caterpillar and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Invesco SP
The main advantage of trading using opposite Caterpillar and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Invesco SP vs. Vanguard Mid Cap Index | Invesco SP vs. Vanguard Extended Market | Invesco SP vs. iShares Core SP | Invesco SP vs. SPDR SP MIDCAP |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |