Correlation Between Caterpillar and Vale Indonesia
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Vale Indonesia 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 Vale Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Vale Indonesia Tbk, you can compare the effects of market volatilities on Caterpillar and Vale Indonesia 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 Vale Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Vale Indonesia.
Diversification Opportunities for Caterpillar and Vale Indonesia
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Vale is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk 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 Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Caterpillar i.e., Caterpillar and Vale Indonesia go up and down completely randomly.
Pair Corralation between Caterpillar and Vale Indonesia
If you would invest 33,902 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 6,709 from holding Caterpillar or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 1.56% |
| Values | Daily Returns |
Caterpillar vs. Vale Indonesia Tbk
Performance |
| Timeline |
| Caterpillar |
| Vale Indonesia Tbk |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Vale Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Vale Indonesia
The main advantage of trading using opposite Caterpillar and Vale Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Vale Indonesia 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 Vale Indonesia will offset losses from the drop in Vale Indonesia's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| Vale Indonesia vs. Rio Tinto ADR | Vale Indonesia vs. BHP Group Limited | Vale Indonesia vs. Teck Resources Ltd | Vale Indonesia vs. MP Materials Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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