Correlation Between Caterpillar and WisdomTree MidCap
Can any of the company-specific risk be diversified away by investing in both Caterpillar and WisdomTree MidCap 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 WisdomTree MidCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and WisdomTree MidCap Earnings, you can compare the effects of market volatilities on Caterpillar and WisdomTree MidCap 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 WisdomTree MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and WisdomTree MidCap.
Diversification Opportunities for Caterpillar and WisdomTree MidCap
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and WisdomTree is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and WisdomTree MidCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 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 WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of Caterpillar i.e., Caterpillar and WisdomTree MidCap go up and down completely randomly.
Pair Corralation between Caterpillar and WisdomTree MidCap
Considering the 90-day investment horizon Caterpillar is expected to generate 1.4 times less return on investment than WisdomTree MidCap. In addition to that, Caterpillar is 2.74 times more volatile than WisdomTree MidCap Earnings. It trades about 0.07 of its total potential returns per unit of risk. WisdomTree MidCap Earnings is currently generating about 0.26 per unit of volatility. If you would invest 6,287 in WisdomTree MidCap Earnings on November 5, 2024 and sell it today you would earn a total of 242.00 from holding WisdomTree MidCap Earnings or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. WisdomTree MidCap Earnings
Performance |
| Timeline |
| Caterpillar |
| WisdomTree MidCap |
Caterpillar and WisdomTree MidCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and WisdomTree MidCap
The main advantage of trading using opposite Caterpillar and WisdomTree MidCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, WisdomTree MidCap 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 WisdomTree MidCap will offset losses from the drop in WisdomTree MidCap's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| WisdomTree MidCap vs. WisdomTree SmallCap Earnings | WisdomTree MidCap vs. WisdomTree Earnings 500 | WisdomTree MidCap vs. WisdomTree MidCap Dividend | WisdomTree MidCap vs. NXG NextGen Infrastructure |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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