Correlation Between Caterpillar and Putnam Sustainable
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Putnam Sustainable 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 Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Putnam Sustainable Leaders, you can compare the effects of market volatilities on Caterpillar and Putnam Sustainable 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 Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Putnam Sustainable.
Diversification Opportunities for Caterpillar and Putnam Sustainable
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Putnam is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Putnam Sustainable Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Sustainable 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 Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Sustainable has no effect on the direction of Caterpillar i.e., Caterpillar and Putnam Sustainable go up and down completely randomly.
Pair Corralation between Caterpillar and Putnam Sustainable
Considering the 90-day investment horizon Caterpillar is expected to generate 2.8 times more return on investment than Putnam Sustainable. However, Caterpillar is 2.8 times more volatile than Putnam Sustainable Leaders. It trades about 0.09 of its potential returns per unit of risk. Putnam Sustainable Leaders is currently generating about 0.11 per unit of risk. If you would invest 38,751 in Caterpillar on August 30, 2024 and sell it today you would earn a total of 1,619 from holding Caterpillar or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Caterpillar vs. Putnam Sustainable Leaders
Performance |
| Timeline |
| Caterpillar |
| Putnam Sustainable |
Caterpillar and Putnam Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Putnam Sustainable
The main advantage of trading using opposite Caterpillar and Putnam Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Putnam Sustainable 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 Sustainable will offset losses from the drop in Putnam Sustainable's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Putnam Sustainable vs. Putnam Sustainable Future | Putnam Sustainable vs. Putnam Focused Large | Putnam Sustainable vs. Putnam Focused Large | Putnam Sustainable vs. Overlay Shares Hedged |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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