Correlation Between Caterpillar and InMed Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Caterpillar and InMed Pharmaceuticals 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 InMed Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and InMed Pharmaceuticals, you can compare the effects of market volatilities on Caterpillar and InMed Pharmaceuticals 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 InMed Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and InMed Pharmaceuticals.
Diversification Opportunities for Caterpillar and InMed Pharmaceuticals
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and InMed is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and InMed Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMed Pharmaceuticals 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 InMed Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InMed Pharmaceuticals has no effect on the direction of Caterpillar i.e., Caterpillar and InMed Pharmaceuticals go up and down completely randomly.
Pair Corralation between Caterpillar and InMed Pharmaceuticals
Considering the 90-day investment horizon Caterpillar is expected to generate 4.31 times less return on investment than InMed Pharmaceuticals. But when comparing it to its historical volatility, Caterpillar is 10.61 times less risky than InMed Pharmaceuticals. It trades about 0.09 of its potential returns per unit of risk. InMed Pharmaceuticals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 602.00 in InMed Pharmaceuticals on August 28, 2024 and sell it today you would lose (152.00) from holding InMed Pharmaceuticals or give up 25.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. InMed Pharmaceuticals
Performance |
| Timeline |
| Caterpillar |
| InMed Pharmaceuticals |
Caterpillar and InMed Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and InMed Pharmaceuticals
The main advantage of trading using opposite Caterpillar and InMed Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, InMed Pharmaceuticals 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 InMed Pharmaceuticals will offset losses from the drop in InMed Pharmaceuticals' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| InMed Pharmaceuticals vs. Quoin Pharmaceuticals Ltd | InMed Pharmaceuticals vs. Allarity Therapeutics | InMed Pharmaceuticals vs. Virax Biolabs Group | InMed Pharmaceuticals vs. Biodexa Pharmaceticals |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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