Correlation Between Caterpillar and IShares IBonds
Can any of the company-specific risk be diversified away by investing in both Caterpillar and IShares IBonds 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 IShares IBonds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and iShares iBonds Dec, you can compare the effects of market volatilities on Caterpillar and IShares IBonds 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 IShares IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and IShares IBonds.
Diversification Opportunities for Caterpillar and IShares IBonds
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec 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 IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of Caterpillar i.e., Caterpillar and IShares IBonds go up and down completely randomly.
Pair Corralation between Caterpillar and IShares IBonds
Considering the 90-day investment horizon Caterpillar is expected to generate 8.03 times more return on investment than IShares IBonds. However, Caterpillar is 8.03 times more volatile than iShares iBonds Dec. It trades about 0.1 of its potential returns per unit of risk. iShares iBonds Dec is currently generating about 0.13 per unit of risk. If you would invest 32,883 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 7,728 from holding Caterpillar or generate 23.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Caterpillar vs. iShares iBonds Dec
Performance |
| Timeline |
| Caterpillar |
| iShares iBonds Dec |
Caterpillar and IShares IBonds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and IShares IBonds
The main advantage of trading using opposite Caterpillar and IShares IBonds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, IShares IBonds 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 IShares IBonds will offset losses from the drop in IShares IBonds' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| IShares IBonds vs. Invesco BulletShares 2025 | IShares IBonds vs. iShares iBonds Dec | IShares IBonds vs. Invesco BulletShares 2026 |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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