Correlation Between Caterpillar and VanEck Investment
Can any of the company-specific risk be diversified away by investing in both Caterpillar and VanEck Investment 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 VanEck Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and VanEck Investment Grade, you can compare the effects of market volatilities on Caterpillar and VanEck Investment 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 VanEck Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and VanEck Investment.
Diversification Opportunities for Caterpillar and VanEck Investment
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and VanEck is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and VanEck Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Investment Grade 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 VanEck Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Investment Grade has no effect on the direction of Caterpillar i.e., Caterpillar and VanEck Investment go up and down completely randomly.
Pair Corralation between Caterpillar and VanEck Investment
Considering the 90-day investment horizon Caterpillar is expected to generate 37.06 times more return on investment than VanEck Investment. However, Caterpillar is 37.06 times more volatile than VanEck Investment Grade. It trades about 0.07 of its potential returns per unit of risk. VanEck Investment Grade is currently generating about 0.29 per unit of risk. If you would invest 36,287 in Caterpillar on November 5, 2024 and sell it today you would earn a total of 857.00 from holding Caterpillar or generate 2.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. VanEck Investment Grade
Performance |
| Timeline |
| Caterpillar |
| VanEck Investment Grade |
Caterpillar and VanEck Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and VanEck Investment
The main advantage of trading using opposite Caterpillar and VanEck Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, VanEck Investment 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 VanEck Investment will offset losses from the drop in VanEck Investment's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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