Correlation Between Caterpillar and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both Caterpillar and NSTAR Electric 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 NSTAR Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and NSTAR Electric, you can compare the effects of market volatilities on Caterpillar and NSTAR Electric 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 NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and NSTAR Electric.
Diversification Opportunities for Caterpillar and NSTAR Electric
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and NSTAR is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric 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 NSTAR Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of Caterpillar i.e., Caterpillar and NSTAR Electric go up and down completely randomly.
Pair Corralation between Caterpillar and NSTAR Electric
If you would invest 37,963 in Caterpillar on September 2, 2024 and sell it today you would earn a total of 2,648 from holding Caterpillar or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. NSTAR Electric
Performance |
| Timeline |
| Caterpillar |
| NSTAR Electric |
Caterpillar and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and NSTAR Electric
The main advantage of trading using opposite Caterpillar and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, NSTAR Electric 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 NSTAR Electric will offset losses from the drop in NSTAR Electric's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| NSTAR Electric vs. Southern Company | NSTAR Electric vs. Duke Energy | NSTAR Electric vs. Duke Energy | NSTAR Electric vs. National Grid PLC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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