Correlation Between Caterpillar and Barclays Capital
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Barclays Capital 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 Barclays Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Barclays Capital, you can compare the effects of market volatilities on Caterpillar and Barclays Capital 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 Barclays Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Barclays Capital.
Diversification Opportunities for Caterpillar and Barclays Capital
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Barclays is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Barclays Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays Capital 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 Barclays Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays Capital has no effect on the direction of Caterpillar i.e., Caterpillar and Barclays Capital go up and down completely randomly.
Pair Corralation between Caterpillar and Barclays Capital
Considering the 90-day investment horizon Caterpillar is expected to generate 1.03 times more return on investment than Barclays Capital. However, Caterpillar is 1.03 times more volatile than Barclays Capital. It trades about 0.08 of its potential returns per unit of risk. Barclays Capital is currently generating about 0.01 per unit of risk. If you would invest 22,712 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 17,899 from holding Caterpillar or generate 78.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 30.71% |
| Values | Daily Returns |
Caterpillar vs. Barclays Capital
Performance |
| Timeline |
| Caterpillar |
| Barclays Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Barclays Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Barclays Capital
The main advantage of trading using opposite Caterpillar and Barclays Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Barclays Capital 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 Barclays Capital will offset losses from the drop in Barclays Capital's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
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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