Correlation Between Caterpillar and Hi Sun
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Hi Sun 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 Hi Sun into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Hi Sun Technology, you can compare the effects of market volatilities on Caterpillar and Hi Sun 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 Hi Sun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Hi Sun.
Diversification Opportunities for Caterpillar and Hi Sun
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and HISNF is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Hi Sun Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Sun Technology 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 Hi Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Sun Technology has no effect on the direction of Caterpillar i.e., Caterpillar and Hi Sun go up and down completely randomly.
Pair Corralation between Caterpillar and Hi Sun
Considering the 90-day investment horizon Caterpillar is expected to generate 1.99 times less return on investment than Hi Sun. But when comparing it to its historical volatility, Caterpillar is 6.05 times less risky than Hi Sun. It trades about 0.08 of its potential returns per unit of risk. Hi Sun Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5.00 in Hi Sun Technology on September 3, 2024 and sell it today you would lose (1.80) from holding Hi Sun Technology or give up 36.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Hi Sun Technology
Performance |
| Timeline |
| Caterpillar |
| Hi Sun Technology |
Caterpillar and Hi Sun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Hi Sun
The main advantage of trading using opposite Caterpillar and Hi Sun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Hi Sun 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 Hi Sun will offset losses from the drop in Hi Sun's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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