Correlation Between Caterpillar and IShares SP
Can any of the company-specific risk be diversified away by investing in both Caterpillar and IShares SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and iShares SP Mid Cap, you can compare the effects of market volatilities on Caterpillar and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and IShares SP.
Diversification Opportunities for Caterpillar and IShares SP
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and iShares SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Mid 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Mid has no effect on the direction of Caterpillar i.e., Caterpillar and IShares SP go up and down completely randomly.
Pair Corralation between Caterpillar and IShares SP
Considering the 90-day investment horizon Caterpillar is expected to generate 3.65 times less return on investment than IShares SP. In addition to that, Caterpillar is 1.92 times more volatile than iShares SP Mid Cap. It trades about 0.03 of its total potential returns per unit of risk. iShares SP Mid Cap is currently generating about 0.21 per unit of volatility. If you would invest 12,425 in iShares SP Mid Cap on August 24, 2024 and sell it today you would earn a total of 705.00 from holding iShares SP Mid Cap or generate 5.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. iShares SP Mid Cap
Performance |
| Timeline |
| Caterpillar |
| iShares SP Mid |
Caterpillar and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and IShares SP
The main advantage of trading using opposite Caterpillar and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.| Caterpillar vs. Small Cap Core | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Mutual Of America | Caterpillar vs. Ep Emerging Markets |
| IShares SP vs. First Trust Small | IShares SP vs. First Trust Mid | IShares SP vs. First Trust Small | IShares SP vs. First Trust Large |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |