Correlation Between Caterpillar and Fidelity Fundamental
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Fidelity Fundamental 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 Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Fidelity Fundamental Large, you can compare the effects of market volatilities on Caterpillar and Fidelity Fundamental 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 Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Fidelity Fundamental.
Diversification Opportunities for Caterpillar and Fidelity Fundamental
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Caterpillar and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Fidelity Fundamental Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Fundamental 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 Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Fundamental has no effect on the direction of Caterpillar i.e., Caterpillar and Fidelity Fundamental go up and down completely randomly.
Pair Corralation between Caterpillar and Fidelity Fundamental
Considering the 90-day investment horizon Caterpillar is expected to generate 2.71 times more return on investment than Fidelity Fundamental. However, Caterpillar is 2.71 times more volatile than Fidelity Fundamental Large. It trades about 0.09 of its potential returns per unit of risk. Fidelity Fundamental Large is currently generating about 0.11 per unit of risk. If you would invest 38,751 in Caterpillar on August 30, 2024 and sell it today you would earn a total of 1,619 from holding Caterpillar or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Fidelity Fundamental Large
Performance |
| Timeline |
| Caterpillar |
| Fidelity Fundamental |
Caterpillar and Fidelity Fundamental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Fidelity Fundamental
The main advantage of trading using opposite Caterpillar and Fidelity Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Fidelity Fundamental 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 Fundamental will offset losses from the drop in Fidelity Fundamental's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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