Correlation Between Caterpillar and John Hancock
Can any of the company-specific risk be diversified away by investing in both Caterpillar and John Hancock 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 John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and John Hancock Multifactor, you can compare the effects of market volatilities on Caterpillar and John Hancock 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 John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and John Hancock.
Diversification Opportunities for Caterpillar and John Hancock
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and John is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and John Hancock Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Multifactor 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 John Hancock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Hancock Multifactor has no effect on the direction of Caterpillar i.e., Caterpillar and John Hancock go up and down completely randomly.
Pair Corralation between Caterpillar and John Hancock
Considering the 90-day investment horizon Caterpillar is expected to generate 1.95 times more return on investment than John Hancock. However, Caterpillar is 1.95 times more volatile than John Hancock Multifactor. It trades about 0.07 of its potential returns per unit of risk. John Hancock Multifactor is currently generating about 0.1 per unit of risk. If you would invest 33,021 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 6,728 from holding Caterpillar or generate 20.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. John Hancock Multifactor
Performance |
| Timeline |
| Caterpillar |
| John Hancock Multifactor |
Caterpillar and John Hancock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and John Hancock
The main advantage of trading using opposite Caterpillar and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, John Hancock 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 John Hancock will offset losses from the drop in John Hancock's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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