Correlation Between Caterpillar and FlexShares STOXX
Can any of the company-specific risk be diversified away by investing in both Caterpillar and FlexShares STOXX 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 FlexShares STOXX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and FlexShares STOXX Global, you can compare the effects of market volatilities on Caterpillar and FlexShares STOXX 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 FlexShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and FlexShares STOXX.
Diversification Opportunities for Caterpillar and FlexShares STOXX
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Caterpillar and FlexShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and FlexShares STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX Global 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 FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX Global has no effect on the direction of Caterpillar i.e., Caterpillar and FlexShares STOXX go up and down completely randomly.
Pair Corralation between Caterpillar and FlexShares STOXX
Considering the 90-day investment horizon Caterpillar is expected to under-perform the FlexShares STOXX. In addition to that, Caterpillar is 2.34 times more volatile than FlexShares STOXX Global. It trades about -0.01 of its total potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.07 per unit of volatility. If you would invest 16,746 in FlexShares STOXX Global on December 11, 2024 and sell it today you would earn a total of 358.00 from holding FlexShares STOXX Global or generate 2.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. FlexShares STOXX Global
Performance |
| Timeline |
| Caterpillar |
| FlexShares STOXX Global |
Caterpillar and FlexShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and FlexShares STOXX
The main advantage of trading using opposite Caterpillar and FlexShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, FlexShares STOXX 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 FlexShares STOXX will offset losses from the drop in FlexShares STOXX's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| FlexShares STOXX vs. FlexShares Quality Large | FlexShares STOXX vs. FlexShares Disciplined Duration | FlexShares STOXX vs. FlexShares Real Assets | FlexShares STOXX vs. First Trust Developed |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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