Correlation Between Caterpillar and Greater Cannabis
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Greater Cannabis 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 Greater Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Greater Cannabis, you can compare the effects of market volatilities on Caterpillar and Greater Cannabis 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 Greater Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Greater Cannabis.
Diversification Opportunities for Caterpillar and Greater Cannabis
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Greater is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Greater Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greater Cannabis 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 Greater Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greater Cannabis has no effect on the direction of Caterpillar i.e., Caterpillar and Greater Cannabis go up and down completely randomly.
Pair Corralation between Caterpillar and Greater Cannabis
Considering the 90-day investment horizon Caterpillar is expected to generate 0.17 times more return on investment than Greater Cannabis. However, Caterpillar is 5.85 times less risky than Greater Cannabis. It trades about 0.09 of its potential returns per unit of risk. Greater Cannabis is currently generating about -0.01 per unit of risk. If you would invest 39,061 in Caterpillar on August 28, 2024 and sell it today you would earn a total of 1,722 from holding Caterpillar or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Greater Cannabis
Performance |
| Timeline |
| Caterpillar |
| Greater Cannabis |
Caterpillar and Greater Cannabis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Greater Cannabis
The main advantage of trading using opposite Caterpillar and Greater Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Greater Cannabis 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 Greater Cannabis will offset losses from the drop in Greater Cannabis' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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