Correlation Between Caterpillar and Innovator ETFs
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Innovator ETFs 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 Innovator ETFs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Innovator ETFs Trust, you can compare the effects of market volatilities on Caterpillar and Innovator ETFs 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 Innovator ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Innovator ETFs.
Diversification Opportunities for Caterpillar and Innovator ETFs
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Innovator is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs Trust 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 Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of Caterpillar i.e., Caterpillar and Innovator ETFs go up and down completely randomly.
Pair Corralation between Caterpillar and Innovator ETFs
Considering the 90-day investment horizon Caterpillar is expected to generate 16.16 times more return on investment than Innovator ETFs. However, Caterpillar is 16.16 times more volatile than Innovator ETFs Trust. It trades about 0.08 of its potential returns per unit of risk. Innovator ETFs Trust is currently generating about 0.21 per unit of risk. If you would invest 21,921 in Caterpillar on August 30, 2024 and sell it today you would earn a total of 18,449 from holding Caterpillar or generate 84.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 71.92% |
| Values | Daily Returns |
Caterpillar vs. Innovator ETFs Trust
Performance |
| Timeline |
| Caterpillar |
| Innovator ETFs Trust |
Caterpillar and Innovator ETFs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Innovator ETFs
The main advantage of trading using opposite Caterpillar and Innovator ETFs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Innovator ETFs 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 Innovator ETFs will offset losses from the drop in Innovator ETFs' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Innovator ETFs vs. ABIVAX Socit Anonyme | Innovator ETFs vs. Pinnacle Sherman Multi Strategy | Innovator ETFs vs. Morningstar Unconstrained Allocation | Innovator ETFs vs. SPACE |
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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