Correlation Between Caterpillar and Qs Defensive
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Qs Defensive 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 Qs Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Qs Defensive Growth, you can compare the effects of market volatilities on Caterpillar and Qs Defensive 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 Qs Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Qs Defensive.
Diversification Opportunities for Caterpillar and Qs Defensive
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and SBCLX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Qs Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qs Defensive Growth 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 Qs Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qs Defensive Growth has no effect on the direction of Caterpillar i.e., Caterpillar and Qs Defensive go up and down completely randomly.
Pair Corralation between Caterpillar and Qs Defensive
Considering the 90-day investment horizon Caterpillar is expected to generate 4.16 times more return on investment than Qs Defensive. However, Caterpillar is 4.16 times more volatile than Qs Defensive Growth. It trades about 0.12 of its potential returns per unit of risk. Qs Defensive Growth is currently generating about 0.14 per unit of risk. If you would invest 24,359 in Caterpillar on August 24, 2024 and sell it today you would earn a total of 15,226 from holding Caterpillar or generate 62.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Qs Defensive Growth
Performance |
| Timeline |
| Caterpillar |
| Qs Defensive Growth |
Caterpillar and Qs Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Qs Defensive
The main advantage of trading using opposite Caterpillar and Qs Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Qs Defensive 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 Qs Defensive will offset losses from the drop in Qs Defensive's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Qs Defensive vs. Columbia Vertible Securities | Qs Defensive vs. Fidelity Vertible Securities | Qs Defensive vs. Allianzgi Vertible Fund | Qs Defensive vs. Virtus Convertible |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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