Correlation Between Caterpillar and Innovator Power
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Innovator Power 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 Innovator Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Innovator Power Buffer, you can compare the effects of market volatilities on Caterpillar and Innovator Power 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 Innovator Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Innovator Power.
Diversification Opportunities for Caterpillar and Innovator Power
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Innovator is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Innovator Power Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Power Buffer 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 Innovator Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Power Buffer has no effect on the direction of Caterpillar i.e., Caterpillar and Innovator Power go up and down completely randomly.
Pair Corralation between Caterpillar and Innovator Power
Considering the 90-day investment horizon Caterpillar is expected to generate 3.96 times more return on investment than Innovator Power. However, Caterpillar is 3.96 times more volatile than Innovator Power Buffer. It trades about 0.1 of its potential returns per unit of risk. Innovator Power Buffer is currently generating about 0.14 per unit of risk. If you would invest 32,883 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 7,728 from holding Caterpillar or generate 23.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Caterpillar vs. Innovator Power Buffer
Performance |
| Timeline |
| Caterpillar |
| Innovator Power Buffer |
Caterpillar and Innovator Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Innovator Power
The main advantage of trading using opposite Caterpillar and Innovator Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Innovator Power 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 Innovator Power will offset losses from the drop in Innovator Power's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Innovator Power vs. Innovator ETFs Trust | Innovator Power vs. First Trust Cboe | Innovator Power vs. Innovator SP 500 | Innovator Power vs. Innovator Equity Power |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |