Correlation Between Caterpillar and MOL PLC
Can any of the company-specific risk be diversified away by investing in both Caterpillar and MOL PLC 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 MOL PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and MOL PLC ADR, you can compare the effects of market volatilities on Caterpillar and MOL PLC 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 MOL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and MOL PLC.
Diversification Opportunities for Caterpillar and MOL PLC
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and MOL is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and MOL PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOL PLC ADR 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 MOL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOL PLC ADR has no effect on the direction of Caterpillar i.e., Caterpillar and MOL PLC go up and down completely randomly.
Pair Corralation between Caterpillar and MOL PLC
Considering the 90-day investment horizon Caterpillar is expected to generate 1.64 times more return on investment than MOL PLC. However, Caterpillar is 1.64 times more volatile than MOL PLC ADR. It trades about 0.05 of its potential returns per unit of risk. MOL PLC ADR is currently generating about -0.13 per unit of risk. If you would invest 39,061 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 688.00 from holding Caterpillar or generate 1.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. MOL PLC ADR
Performance |
| Timeline |
| Caterpillar |
| MOL PLC ADR |
Caterpillar and MOL PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and MOL PLC
The main advantage of trading using opposite Caterpillar and MOL PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, MOL PLC 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 MOL PLC will offset losses from the drop in MOL PLC's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| MOL PLC vs. Equinor ASA ADR | MOL PLC vs. TotalEnergies SE ADR | MOL PLC vs. Ecopetrol SA ADR | MOL PLC vs. National Fuel Gas |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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