Correlation Between Caterpillar and Norden Crown
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Norden Crown 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 Norden Crown into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Norden Crown Metals, you can compare the effects of market volatilities on Caterpillar and Norden Crown 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 Norden Crown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Norden Crown.
Diversification Opportunities for Caterpillar and Norden Crown
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Norden is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Norden Crown Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norden Crown Metals 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 Norden Crown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norden Crown Metals has no effect on the direction of Caterpillar i.e., Caterpillar and Norden Crown go up and down completely randomly.
Pair Corralation between Caterpillar and Norden Crown
Considering the 90-day investment horizon Caterpillar is expected to generate 8.32 times less return on investment than Norden Crown. But when comparing it to its historical volatility, Caterpillar is 4.82 times less risky than Norden Crown. It trades about 0.13 of its potential returns per unit of risk. Norden Crown Metals is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3.82 in Norden Crown Metals on September 5, 2024 and sell it today you would earn a total of 2.08 from holding Norden Crown Metals or generate 54.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Norden Crown Metals
Performance |
| Timeline |
| Caterpillar |
| Norden Crown Metals |
Caterpillar and Norden Crown Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Norden Crown
The main advantage of trading using opposite Caterpillar and Norden Crown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Norden Crown 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 Norden Crown will offset losses from the drop in Norden Crown's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
| Norden Crown vs. Qubec Nickel Corp | Norden Crown vs. IGO Limited | Norden Crown vs. Avarone Metals | Norden Crown vs. Elcora Advanced Materials |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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