Correlation Between Caterpillar and Putnam Global
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Putnam Global 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 Putnam Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Putnam Global Industrials, you can compare the effects of market volatilities on Caterpillar and Putnam Global 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 Putnam Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Putnam Global.
Diversification Opportunities for Caterpillar and Putnam Global
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Caterpillar and Putnam is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Putnam Global Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Industrials 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 Putnam Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Global Industrials has no effect on the direction of Caterpillar i.e., Caterpillar and Putnam Global go up and down completely randomly.
Pair Corralation between Caterpillar and Putnam Global
Considering the 90-day investment horizon Caterpillar is expected to generate 2.89 times more return on investment than Putnam Global. However, Caterpillar is 2.89 times more volatile than Putnam Global Industrials. It trades about 0.08 of its potential returns per unit of risk. Putnam Global Industrials is currently generating about 0.09 per unit of risk. If you would invest 39,061 in Caterpillar on August 28, 2024 and sell it today you would earn a total of 1,504 from holding Caterpillar or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Putnam Global Industrials
Performance |
| Timeline |
| Caterpillar |
| Putnam Global Industrials |
Caterpillar and Putnam Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Putnam Global
The main advantage of trading using opposite Caterpillar and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Putnam Global 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 Putnam Global will offset losses from the drop in Putnam Global's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Putnam Global vs. Putnam Growth Opportunities | Putnam Global vs. Putnam International Equity | Putnam Global vs. George Putnam Fund | Putnam Global vs. Putnam Small Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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