Correlation Between Caterpillar and NioCorp Developments
Can any of the company-specific risk be diversified away by investing in both Caterpillar and NioCorp Developments 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 NioCorp Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and NioCorp Developments Ltd, you can compare the effects of market volatilities on Caterpillar and NioCorp Developments 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 NioCorp Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and NioCorp Developments.
Diversification Opportunities for Caterpillar and NioCorp Developments
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and NioCorp is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments 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 NioCorp Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NioCorp Developments has no effect on the direction of Caterpillar i.e., Caterpillar and NioCorp Developments go up and down completely randomly.
Pair Corralation between Caterpillar and NioCorp Developments
Considering the 90-day investment horizon Caterpillar is expected to generate 0.65 times more return on investment than NioCorp Developments. However, Caterpillar is 1.55 times less risky than NioCorp Developments. It trades about 0.09 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.44 per unit of risk. If you would invest 39,061 in Caterpillar on August 29, 2024 and sell it today you would earn a total of 1,722 from holding Caterpillar or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. NioCorp Developments Ltd
Performance |
| Timeline |
| Caterpillar |
| NioCorp Developments |
Caterpillar and NioCorp Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and NioCorp Developments
The main advantage of trading using opposite Caterpillar and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, NioCorp Developments 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 NioCorp Developments will offset losses from the drop in NioCorp Developments' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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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