Correlation Between Caterpillar and Erasca
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Erasca 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 Erasca into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Erasca Inc, you can compare the effects of market volatilities on Caterpillar and Erasca 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 Erasca. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Erasca.
Diversification Opportunities for Caterpillar and Erasca
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Erasca is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Erasca Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erasca Inc 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 Erasca. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erasca Inc has no effect on the direction of Caterpillar i.e., Caterpillar and Erasca go up and down completely randomly.
Pair Corralation between Caterpillar and Erasca
Considering the 90-day investment horizon Caterpillar is expected to generate 0.38 times more return on investment than Erasca. However, Caterpillar is 2.61 times less risky than Erasca. It trades about 0.1 of its potential returns per unit of risk. Erasca Inc is currently generating about 0.02 per unit of risk. If you would invest 22,843 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 17,768 from holding Caterpillar or generate 77.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Erasca Inc
Performance |
| Timeline |
| Caterpillar |
| Erasca Inc |
Caterpillar and Erasca Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Erasca
The main advantage of trading using opposite Caterpillar and Erasca positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Erasca 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 Erasca will offset losses from the drop in Erasca's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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