Correlation Between Caterpillar and Grindrod
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Grindrod 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 Grindrod into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Grindrod Ltd ADR, you can compare the effects of market volatilities on Caterpillar and Grindrod 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 Grindrod. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Grindrod.
Diversification Opportunities for Caterpillar and Grindrod
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Caterpillar and Grindrod is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Grindrod Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grindrod ADR 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 Grindrod. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grindrod ADR has no effect on the direction of Caterpillar i.e., Caterpillar and Grindrod go up and down completely randomly.
Pair Corralation between Caterpillar and Grindrod
Considering the 90-day investment horizon Caterpillar is expected to generate 14.94 times more return on investment than Grindrod. However, Caterpillar is 14.94 times more volatile than Grindrod Ltd ADR. It trades about 0.08 of its potential returns per unit of risk. Grindrod Ltd ADR is currently generating about 0.09 per unit of risk. If you would invest 22,712 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 17,899 from holding Caterpillar or generate 78.81% 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. Grindrod Ltd ADR
Performance |
| Timeline |
| Caterpillar |
| Grindrod ADR |
Caterpillar and Grindrod Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Grindrod
The main advantage of trading using opposite Caterpillar and Grindrod positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Grindrod 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 Grindrod will offset losses from the drop in Grindrod's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| Grindrod vs. Inhibrx | Grindrod vs. Acumen Pharmaceuticals | Grindrod vs. Dominos Pizza | Grindrod vs. Western Midstream Partners |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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