Correlation Between Caterpillar and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Caterpillar and FT Cboe 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 FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and FT Cboe Vest, you can compare the effects of market volatilities on Caterpillar and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and FT Cboe.
Diversification Opportunities for Caterpillar and FT Cboe
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and FJUN is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Caterpillar i.e., Caterpillar and FT Cboe go up and down completely randomly.
Pair Corralation between Caterpillar and FT Cboe
Considering the 90-day investment horizon Caterpillar is expected to generate 3.31 times more return on investment than FT Cboe. However, Caterpillar is 3.31 times more volatile than FT Cboe Vest. It trades about 0.13 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.18 per unit of risk. If you would invest 23,452 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 17,159 from holding Caterpillar or generate 73.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Caterpillar vs. FT Cboe Vest
Performance |
| Timeline |
| Caterpillar |
| FT Cboe Vest |
Caterpillar and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and FT Cboe
The main advantage of trading using opposite Caterpillar and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| FT Cboe vs. Innovator ETFs Trust | FT Cboe vs. First Trust Cboe | FT Cboe vs. Innovator SP 500 | FT Cboe vs. Innovator SP 500 |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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