Correlation Between Caterpillar and Direxion
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Direxion 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 Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Direxion, you can compare the effects of market volatilities on Caterpillar and Direxion 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 Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Direxion.
Diversification Opportunities for Caterpillar and Direxion
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Direxion is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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 Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Caterpillar i.e., Caterpillar and Direxion go up and down completely randomly.
Pair Corralation between Caterpillar and Direxion
Considering the 90-day investment horizon Caterpillar is expected to generate 0.9 times more return on investment than Direxion. However, Caterpillar is 1.11 times less risky than Direxion. It trades about 0.08 of its potential returns per unit of risk. Direxion is currently generating about 0.0 per unit of risk. If you would invest 22,712 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 17,899 from holding Caterpillar or generate 78.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 19.6% |
| Values | Daily Returns |
Caterpillar vs. Direxion
Performance |
| Timeline |
| Caterpillar |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Direxion
The main advantage of trading using opposite Caterpillar and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Direxion 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 Direxion will offset losses from the drop in Direxion's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| Direxion vs. Vanguard Consumer Staples | Direxion vs. Vanguard Financials Index | Direxion vs. Vanguard Information Technology | Direxion vs. Vanguard Consumer Discretionary |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |