Correlation Between Caterpillar and Metso Outotec
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Metso Outotec 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 Metso Outotec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Metso Outotec Oyj, you can compare the effects of market volatilities on Caterpillar and Metso Outotec 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 Metso Outotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Metso Outotec.
Diversification Opportunities for Caterpillar and Metso Outotec
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Caterpillar and Metso is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj 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 Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Oyj has no effect on the direction of Caterpillar i.e., Caterpillar and Metso Outotec go up and down completely randomly.
Pair Corralation between Caterpillar and Metso Outotec
If you would invest 1,044 in Metso Outotec Oyj on September 12, 2024 and sell it today you would earn a total of 0.00 from holding Metso Outotec Oyj or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Caterpillar vs. Metso Outotec Oyj
Performance |
| Timeline |
| Caterpillar |
| Metso Outotec Oyj |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Caterpillar and Metso Outotec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Metso Outotec
The main advantage of trading using opposite Caterpillar and Metso Outotec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Metso Outotec 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 Metso Outotec will offset losses from the drop in Metso Outotec's long position.| Caterpillar vs. Victory Integrity Smallmid Cap | Caterpillar vs. Hilton Worldwide Holdings | Caterpillar vs. NVIDIA | Caterpillar vs. JPMorgan Chase Co |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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