Correlation Between Caterpillar and Nova Minerals
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Nova Minerals 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 Nova Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Nova Minerals Limited, you can compare the effects of market volatilities on Caterpillar and Nova Minerals 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 Nova Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Nova Minerals.
Diversification Opportunities for Caterpillar and Nova Minerals
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Caterpillar and Nova is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited 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 Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of Caterpillar i.e., Caterpillar and Nova Minerals go up and down completely randomly.
Pair Corralation between Caterpillar and Nova Minerals
If you would invest 37,620 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 2,991 from holding Caterpillar or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Nova Minerals Limited
Performance |
| Timeline |
| Caterpillar |
| Nova Minerals Limited |
Caterpillar and Nova Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Nova Minerals
The main advantage of trading using opposite Caterpillar and Nova Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Nova Minerals 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 Nova Minerals will offset losses from the drop in Nova Minerals' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Nova Minerals vs. ATT Inc | Nova Minerals vs. Merck Company | Nova Minerals vs. Walt Disney | Nova Minerals vs. Caterpillar |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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