Correlation Between Caterpillar and Man Wah
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Man Wah 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 Man Wah into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Man Wah Holdings, you can compare the effects of market volatilities on Caterpillar and Man Wah 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 Man Wah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Man Wah.
Diversification Opportunities for Caterpillar and Man Wah
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Man is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Man Wah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Man Wah Holdings 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 Man Wah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Man Wah Holdings has no effect on the direction of Caterpillar i.e., Caterpillar and Man Wah go up and down completely randomly.
Pair Corralation between Caterpillar and Man Wah
Considering the 90-day investment horizon Caterpillar is expected to generate 0.32 times more return on investment than Man Wah. However, Caterpillar is 3.14 times less risky than Man Wah. It trades about 0.1 of its potential returns per unit of risk. Man Wah Holdings is currently generating about 0.0 per unit of risk. If you would invest 21,675 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 18,074 from holding Caterpillar or generate 83.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.75% |
| Values | Daily Returns |
Caterpillar vs. Man Wah Holdings
Performance |
| Timeline |
| Caterpillar |
| Man Wah Holdings |
Caterpillar and Man Wah Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Man Wah
The main advantage of trading using opposite Caterpillar and Man Wah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Man Wah 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 Man Wah will offset losses from the drop in Man Wah'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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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