Correlation Between Caterpillar and Haier Smart
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Haier Smart 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 Haier Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Haier Smart Home, you can compare the effects of market volatilities on Caterpillar and Haier Smart 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 Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Haier Smart.
Diversification Opportunities for Caterpillar and Haier Smart
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Haier is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Caterpillar i.e., Caterpillar and Haier Smart go up and down completely randomly.
Pair Corralation between Caterpillar and Haier Smart
Considering the 90-day investment horizon Caterpillar is expected to generate 0.43 times more return on investment than Haier Smart. However, Caterpillar is 2.35 times less risky than Haier Smart. It trades about 0.1 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.04 per unit of risk. If you would invest 21,675 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 18,074 from holding Caterpillar or generate 83.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Haier Smart Home
Performance |
| Timeline |
| Caterpillar |
| Haier Smart Home |
Caterpillar and Haier Smart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Haier Smart
The main advantage of trading using opposite Caterpillar and Haier Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Haier Smart 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 Haier Smart will offset losses from the drop in Haier Smart's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Haier Smart vs. La Z Boy Incorporated | Haier Smart vs. MasterBrand | Haier Smart vs. MillerKnoll | Haier Smart vs. Flexsteel Industries |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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