Correlation Between Caterpillar and Fidelity Covington
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Fidelity Covington 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 Fidelity Covington into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Fidelity Covington Trust, you can compare the effects of market volatilities on Caterpillar and Fidelity Covington 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 Fidelity Covington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Fidelity Covington.
Diversification Opportunities for Caterpillar and Fidelity Covington
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Fidelity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Caterpillar i.e., Caterpillar and Fidelity Covington go up and down completely randomly.
Pair Corralation between Caterpillar and Fidelity Covington
Considering the 90-day investment horizon Caterpillar is expected to generate 2.54 times more return on investment than Fidelity Covington. However, Caterpillar is 2.54 times more volatile than Fidelity Covington Trust. It trades about 0.16 of its potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.28 per unit of risk. If you would invest 37,620 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 2,991 from holding Caterpillar or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caterpillar vs. Fidelity Covington Trust
Performance |
| Timeline |
| Caterpillar |
| Fidelity Covington Trust |
Caterpillar and Fidelity Covington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Fidelity Covington
The main advantage of trading using opposite Caterpillar and Fidelity Covington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Fidelity Covington 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 Fidelity Covington will offset losses from the drop in Fidelity Covington's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Fidelity Covington vs. FT Vest Equity | Fidelity Covington vs. Northern Lights | Fidelity Covington vs. Dimensional International High | Fidelity Covington vs. Matthews China Discovery |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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