Correlation Between Caterpillar and Ironwood Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Ironwood 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 Ironwood Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Ironwood Pharmaceuticals, you can compare the effects of market volatilities on Caterpillar and Ironwood 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 Ironwood Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Ironwood Pharmaceuticals.
Diversification Opportunities for Caterpillar and Ironwood Pharmaceuticals
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Ironwood is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Ironwood Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironwood 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 Ironwood Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironwood Pharmaceuticals has no effect on the direction of Caterpillar i.e., Caterpillar and Ironwood Pharmaceuticals go up and down completely randomly.
Pair Corralation between Caterpillar and Ironwood Pharmaceuticals
Considering the 90-day investment horizon Caterpillar is expected to generate 0.44 times more return on investment than Ironwood Pharmaceuticals. However, Caterpillar is 2.25 times less risky than Ironwood Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Ironwood Pharmaceuticals is currently generating about -0.16 per unit of risk. If you would invest 39,061 in Caterpillar on August 28, 2024 and sell it today you would earn a total of 1,504 from holding Caterpillar or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Ironwood Pharmaceuticals
Performance |
| Timeline |
| Caterpillar |
| Ironwood Pharmaceuticals |
Caterpillar and Ironwood Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Ironwood Pharmaceuticals
The main advantage of trading using opposite Caterpillar and Ironwood Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Ironwood 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 Ironwood Pharmaceuticals will offset losses from the drop in Ironwood Pharmaceuticals' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Ironwood Pharmaceuticals vs. Neurocrine Biosciences | Ironwood Pharmaceuticals vs. Amphastar P | Ironwood Pharmaceuticals vs. Collegium Pharmaceutical | Ironwood Pharmaceuticals vs. ANI Pharmaceuticals |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |