Correlation Between Caterpillar and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Nasdaq Inc, you can compare the effects of market volatilities on Caterpillar and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Nasdaq.
Diversification Opportunities for Caterpillar and Nasdaq
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Caterpillar and Nasdaq is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Caterpillar i.e., Caterpillar and Nasdaq go up and down completely randomly.
Pair Corralation between Caterpillar and Nasdaq
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Nasdaq. In addition to that, Caterpillar is 1.29 times more volatile than Nasdaq Inc. It trades about -0.51 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about -0.08 per unit of volatility. If you would invest 8,146 in Nasdaq Inc on November 27, 2024 and sell it today you would lose (152.00) from holding Nasdaq Inc or give up 1.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Nasdaq Inc
Performance |
| Timeline |
| Caterpillar |
| Nasdaq Inc |
Caterpillar and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Nasdaq
The main advantage of trading using opposite Caterpillar and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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