Correlation Between Caterpillar and Invesco Nasdaq
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Invesco Nasdaq 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 Invesco Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Invesco Nasdaq Biotechnology, you can compare the effects of market volatilities on Caterpillar and Invesco Nasdaq 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 Invesco Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Invesco Nasdaq.
Diversification Opportunities for Caterpillar and Invesco Nasdaq
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Invesco is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Invesco Nasdaq Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Nasdaq Biote 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 Invesco Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Nasdaq Biote has no effect on the direction of Caterpillar i.e., Caterpillar and Invesco Nasdaq go up and down completely randomly.
Pair Corralation between Caterpillar and Invesco Nasdaq
Considering the 90-day investment horizon Caterpillar is expected to generate 1.62 times more return on investment than Invesco Nasdaq. However, Caterpillar is 1.62 times more volatile than Invesco Nasdaq Biotechnology. It trades about 0.14 of its potential returns per unit of risk. Invesco Nasdaq Biotechnology is currently generating about -0.04 per unit of risk. If you would invest 37,652 in Caterpillar on September 4, 2024 and sell it today you would earn a total of 2,599 from holding Caterpillar or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Invesco Nasdaq Biotechnology
Performance |
| Timeline |
| Caterpillar |
| Invesco Nasdaq Biote |
Caterpillar and Invesco Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Invesco Nasdaq
The main advantage of trading using opposite Caterpillar and Invesco Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Invesco Nasdaq 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 Invesco Nasdaq will offset losses from the drop in Invesco Nasdaq's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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