Correlation Between Caterpillar and Greenhill
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Greenhill 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 Greenhill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Greenhill Co, you can compare the effects of market volatilities on Caterpillar and Greenhill 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 Greenhill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Greenhill.
Diversification Opportunities for Caterpillar and Greenhill
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Greenhill is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Greenhill Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenhill 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 Greenhill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenhill has no effect on the direction of Caterpillar i.e., Caterpillar and Greenhill go up and down completely randomly.
Pair Corralation between Caterpillar and Greenhill
If you would invest 37,924 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 2,446 from holding Caterpillar or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 4.55% |
| Values | Daily Returns |
Caterpillar vs. Greenhill Co
Performance |
| Timeline |
| Caterpillar |
| Greenhill |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Greenhill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Greenhill
The main advantage of trading using opposite Caterpillar and Greenhill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Greenhill 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 Greenhill will offset losses from the drop in Greenhill's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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