Correlation Between Caterpillar and New Ulm
Can any of the company-specific risk be diversified away by investing in both Caterpillar and New Ulm 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 New Ulm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and New Ulm Telecom, you can compare the effects of market volatilities on Caterpillar and New Ulm 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 New Ulm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and New Ulm.
Diversification Opportunities for Caterpillar and New Ulm
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and New is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and New Ulm Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Ulm Telecom 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 New Ulm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Ulm Telecom has no effect on the direction of Caterpillar i.e., Caterpillar and New Ulm go up and down completely randomly.
Pair Corralation between Caterpillar and New Ulm
Considering the 90-day investment horizon Caterpillar is expected to generate 0.52 times more return on investment than New Ulm. However, Caterpillar is 1.91 times less risky than New Ulm. It trades about 0.05 of its potential returns per unit of risk. New Ulm Telecom is currently generating about -0.01 per unit of risk. If you would invest 31,879 in Caterpillar on November 3, 2024 and sell it today you would earn a total of 5,265 from holding Caterpillar or generate 16.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. New Ulm Telecom
Performance |
| Timeline |
| Caterpillar |
| New Ulm Telecom |
Caterpillar and New Ulm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and New Ulm
The main advantage of trading using opposite Caterpillar and New Ulm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, New Ulm 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 New Ulm will offset losses from the drop in New Ulm's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| New Ulm vs. KORE Group Holdings | New Ulm vs. Grupo Televisa SAB | New Ulm vs. ATT Inc | New Ulm vs. Verizon Communications |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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