Correlation Between Caterpillar and KraneShares MSCI
Can any of the company-specific risk be diversified away by investing in both Caterpillar and KraneShares MSCI 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 KraneShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and KraneShares MSCI All, you can compare the effects of market volatilities on Caterpillar and KraneShares MSCI 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 KraneShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and KraneShares MSCI.
Diversification Opportunities for Caterpillar and KraneShares MSCI
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and KraneShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and KraneShares MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI All 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 KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI All has no effect on the direction of Caterpillar i.e., Caterpillar and KraneShares MSCI go up and down completely randomly.
Pair Corralation between Caterpillar and KraneShares MSCI
Considering the 90-day investment horizon Caterpillar is expected to generate 0.79 times more return on investment than KraneShares MSCI. However, Caterpillar is 1.26 times less risky than KraneShares MSCI. It trades about 0.12 of its potential returns per unit of risk. KraneShares MSCI All is currently generating about -0.03 per unit of risk. If you would invest 24,359 in Caterpillar on August 24, 2024 and sell it today you would earn a total of 15,226 from holding Caterpillar or generate 62.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. KraneShares MSCI All
Performance |
| Timeline |
| Caterpillar |
| KraneShares MSCI All |
Caterpillar and KraneShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and KraneShares MSCI
The main advantage of trading using opposite Caterpillar and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, KraneShares MSCI 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 KraneShares MSCI will offset losses from the drop in KraneShares MSCI's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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