Correlation Between Caterpillar and Ethema Health
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Ethema Health 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 Ethema Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Ethema Health Corp, you can compare the effects of market volatilities on Caterpillar and Ethema Health 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 Ethema Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Ethema Health.
Diversification Opportunities for Caterpillar and Ethema Health
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Ethema is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Ethema Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethema Health Corp 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 Ethema Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethema Health Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Ethema Health go up and down completely randomly.
Pair Corralation between Caterpillar and Ethema Health
Considering the 90-day investment horizon Caterpillar is expected to generate 8.72 times less return on investment than Ethema Health. But when comparing it to its historical volatility, Caterpillar is 9.24 times less risky than Ethema Health. It trades about 0.08 of its potential returns per unit of risk. Ethema Health Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.04 in Ethema Health Corp on August 30, 2024 and sell it today you would earn a total of 0.00 from holding Ethema Health Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Ethema Health Corp
Performance |
| Timeline |
| Caterpillar |
| Ethema Health Corp |
Caterpillar and Ethema Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Ethema Health
The main advantage of trading using opposite Caterpillar and Ethema Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Ethema Health 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 Ethema Health will offset losses from the drop in Ethema Health'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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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