Correlation Between Caterpillar and IShares ESG
Can any of the company-specific risk be diversified away by investing in both Caterpillar and IShares ESG 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 IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and iShares ESG Aware, you can compare the effects of market volatilities on Caterpillar and IShares ESG 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 IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and IShares ESG.
Diversification Opportunities for Caterpillar and IShares ESG
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of Caterpillar i.e., Caterpillar and IShares ESG go up and down completely randomly.
Pair Corralation between Caterpillar and IShares ESG
Considering the 90-day investment horizon Caterpillar is expected to generate 1.74 times less return on investment than IShares ESG. In addition to that, Caterpillar is 2.98 times more volatile than iShares ESG Aware. It trades about 0.05 of its total potential returns per unit of risk. iShares ESG Aware is currently generating about 0.24 per unit of volatility. If you would invest 2,894 in iShares ESG Aware on November 9, 2024 and sell it today you would earn a total of 103.00 from holding iShares ESG Aware or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. iShares ESG Aware
Performance |
| Timeline |
| Caterpillar |
| iShares ESG Aware |
Caterpillar and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and IShares ESG
The main advantage of trading using opposite Caterpillar and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, IShares ESG 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 IShares ESG will offset losses from the drop in IShares ESG's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| IShares ESG vs. Electric Car | IShares ESG vs. JNS Holdings Corp | IShares ESG vs. Plyzer Technologies | IShares ESG vs. Visium Technologies |
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.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |