Correlation Between Caterpillar and Schwab International
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Schwab International 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 Schwab International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Schwab International Dividend, you can compare the effects of market volatilities on Caterpillar and Schwab International 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 Schwab International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Schwab International.
Diversification Opportunities for Caterpillar and Schwab International
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Schwab is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Schwab International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab International 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 Schwab International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab International has no effect on the direction of Caterpillar i.e., Caterpillar and Schwab International go up and down completely randomly.
Pair Corralation between Caterpillar and Schwab International
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Schwab International. In addition to that, Caterpillar is 2.84 times more volatile than Schwab International Dividend. It trades about -0.06 of its total potential returns per unit of risk. Schwab International Dividend is currently generating about 0.11 per unit of volatility. If you would invest 2,392 in Schwab International Dividend on September 14, 2024 and sell it today you would earn a total of 23.00 from holding Schwab International Dividend or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Schwab International Dividend
Performance |
| Timeline |
| Caterpillar |
| Schwab International |
Caterpillar and Schwab International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Schwab International
The main advantage of trading using opposite Caterpillar and Schwab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Schwab International 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 Schwab International will offset losses from the drop in Schwab International's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
| Schwab International vs. Freedom Day Dividend | Schwab International vs. Franklin Templeton ETF | Schwab International vs. iShares MSCI China | Schwab International vs. Tidal Trust II |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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