Correlation Between Caterpillar and Tidal ETF
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Tidal ETF 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 Tidal ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Tidal ETF Trust, you can compare the effects of market volatilities on Caterpillar and Tidal ETF 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 Tidal ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Tidal ETF.
Diversification Opportunities for Caterpillar and Tidal ETF
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Caterpillar and Tidal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Tidal ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal ETF Trust 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 Tidal ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal ETF Trust has no effect on the direction of Caterpillar i.e., Caterpillar and Tidal ETF go up and down completely randomly.
Pair Corralation between Caterpillar and Tidal ETF
Considering the 90-day investment horizon Caterpillar is expected to generate 4.32 times more return on investment than Tidal ETF. However, Caterpillar is 4.32 times more volatile than Tidal ETF Trust. It trades about 0.15 of its potential returns per unit of risk. Tidal ETF Trust is currently generating about 0.22 per unit of risk. If you would invest 37,963 in Caterpillar on September 2, 2024 and sell it today you would earn a total of 2,648 from holding Caterpillar or generate 6.98% 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. Tidal ETF Trust
Performance |
| Timeline |
| Caterpillar |
| Tidal ETF Trust |
Caterpillar and Tidal ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Tidal ETF
The main advantage of trading using opposite Caterpillar and Tidal ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Tidal ETF 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 Tidal ETF will offset losses from the drop in Tidal ETF's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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