Correlation Between Caterpillar and Idemitsu Kosan
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Idemitsu Kosan 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 Idemitsu Kosan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Idemitsu Kosan Co, you can compare the effects of market volatilities on Caterpillar and Idemitsu Kosan 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 Idemitsu Kosan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Idemitsu Kosan.
Diversification Opportunities for Caterpillar and Idemitsu Kosan
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Idemitsu is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Idemitsu Kosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idemitsu Kosan 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 Idemitsu Kosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idemitsu Kosan has no effect on the direction of Caterpillar i.e., Caterpillar and Idemitsu Kosan go up and down completely randomly.
Pair Corralation between Caterpillar and Idemitsu Kosan
Considering the 90-day investment horizon Caterpillar is expected to generate 0.63 times more return on investment than Idemitsu Kosan. However, Caterpillar is 1.59 times less risky than Idemitsu Kosan. It trades about 0.08 of its potential returns per unit of risk. Idemitsu Kosan Co is currently generating about 0.03 per unit of risk. If you would invest 22,477 in Caterpillar on September 2, 2024 and sell it today you would earn a total of 18,134 from holding Caterpillar or generate 80.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.93% |
| Values | Daily Returns |
Caterpillar vs. Idemitsu Kosan Co
Performance |
| Timeline |
| Caterpillar |
| Idemitsu Kosan |
Caterpillar and Idemitsu Kosan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Idemitsu Kosan
The main advantage of trading using opposite Caterpillar and Idemitsu Kosan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Idemitsu Kosan 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 Idemitsu Kosan will offset losses from the drop in Idemitsu Kosan's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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