Correlation Between Caterpillar and Mereo BioPharma
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Mereo BioPharma 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 Mereo BioPharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Mereo BioPharma Group, you can compare the effects of market volatilities on Caterpillar and Mereo BioPharma 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 Mereo BioPharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Mereo BioPharma.
Diversification Opportunities for Caterpillar and Mereo BioPharma
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Mereo is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Mereo BioPharma Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mereo BioPharma Group 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 Mereo BioPharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mereo BioPharma Group has no effect on the direction of Caterpillar i.e., Caterpillar and Mereo BioPharma go up and down completely randomly.
Pair Corralation between Caterpillar and Mereo BioPharma
Considering the 90-day investment horizon Caterpillar is expected to generate 0.52 times more return on investment than Mereo BioPharma. However, Caterpillar is 1.91 times less risky than Mereo BioPharma. It trades about 0.16 of its potential returns per unit of risk. Mereo BioPharma Group is currently generating about -0.08 per unit of risk. If you would invest 33,902 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 6,468 from holding Caterpillar or generate 19.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Mereo BioPharma Group
Performance |
| Timeline |
| Caterpillar |
| Mereo BioPharma Group |
Caterpillar and Mereo BioPharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Mereo BioPharma
The main advantage of trading using opposite Caterpillar and Mereo BioPharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Mereo BioPharma 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 Mereo BioPharma will offset losses from the drop in Mereo BioPharma's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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