Correlation Between Caterpillar and Pacer Trendpilot
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Pacer Trendpilot 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 Pacer Trendpilot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Pacer Trendpilot Large, you can compare the effects of market volatilities on Caterpillar and Pacer Trendpilot 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 Pacer Trendpilot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Pacer Trendpilot.
Diversification Opportunities for Caterpillar and Pacer Trendpilot
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Pacer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Pacer Trendpilot Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot Large 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 Pacer Trendpilot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Trendpilot Large has no effect on the direction of Caterpillar i.e., Caterpillar and Pacer Trendpilot go up and down completely randomly.
Pair Corralation between Caterpillar and Pacer Trendpilot
Considering the 90-day investment horizon Caterpillar is expected to generate 2.09 times more return on investment than Pacer Trendpilot. However, Caterpillar is 2.09 times more volatile than Pacer Trendpilot Large. It trades about 0.11 of its potential returns per unit of risk. Pacer Trendpilot Large is currently generating about 0.13 per unit of risk. If you would invest 32,694 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 7,917 from holding Caterpillar or generate 24.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Pacer Trendpilot Large
Performance |
| Timeline |
| Caterpillar |
| Pacer Trendpilot Large |
Caterpillar and Pacer Trendpilot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Pacer Trendpilot
The main advantage of trading using opposite Caterpillar and Pacer Trendpilot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Pacer Trendpilot 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 Pacer Trendpilot will offset losses from the drop in Pacer Trendpilot's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| Pacer Trendpilot vs. Pacer Trendpilot 100 | Pacer Trendpilot vs. Pacer Trendpilot Mid | Pacer Trendpilot vs. Pacer Trendpilot European | Pacer Trendpilot vs. Pacer Global Cash |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |