Correlation Between Caterpillar and Sienna Senior
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Sienna Senior 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 Sienna Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Sienna Senior Living, you can compare the effects of market volatilities on Caterpillar and Sienna Senior 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 Sienna Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Sienna Senior.
Diversification Opportunities for Caterpillar and Sienna Senior
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Sienna is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Sienna Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Senior Living 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 Sienna Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Senior Living has no effect on the direction of Caterpillar i.e., Caterpillar and Sienna Senior go up and down completely randomly.
Pair Corralation between Caterpillar and Sienna Senior
Considering the 90-day investment horizon Caterpillar is expected to generate 1.12 times more return on investment than Sienna Senior. However, Caterpillar is 1.12 times more volatile than Sienna Senior Living. It trades about 0.11 of its potential returns per unit of risk. Sienna Senior Living is currently generating about 0.09 per unit of risk. If you would invest 32,694 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 7,917 from holding Caterpillar or generate 24.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 92.0% |
| Values | Daily Returns |
Caterpillar vs. Sienna Senior Living
Performance |
| Timeline |
| Caterpillar |
| Sienna Senior Living |
Caterpillar and Sienna Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Sienna Senior
The main advantage of trading using opposite Caterpillar and Sienna Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Sienna Senior 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 Sienna Senior will offset losses from the drop in Sienna Senior's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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