Correlation Between Caterpillar and Princeton Longshort
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Princeton Longshort 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 Princeton Longshort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Princeton Longshort Treasury, you can compare the effects of market volatilities on Caterpillar and Princeton Longshort 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 Princeton Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Princeton Longshort.
Diversification Opportunities for Caterpillar and Princeton Longshort
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and PRINCETON is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Princeton Longshort Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Longshort 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 Princeton Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Longshort has no effect on the direction of Caterpillar i.e., Caterpillar and Princeton Longshort go up and down completely randomly.
Pair Corralation between Caterpillar and Princeton Longshort
If you would invest 37,652 in Caterpillar on September 4, 2024 and sell it today you would earn a total of 2,599 from holding Caterpillar or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Caterpillar vs. Princeton Longshort Treasury
Performance |
| Timeline |
| Caterpillar |
| Princeton Longshort |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Princeton Longshort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Princeton Longshort
The main advantage of trading using opposite Caterpillar and Princeton Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Princeton Longshort 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 Princeton Longshort will offset losses from the drop in Princeton Longshort's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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