Correlation Between Caterpillar and Scotch Creek
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Scotch Creek 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 Scotch Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Scotch Creek Ventures, you can compare the effects of market volatilities on Caterpillar and Scotch Creek 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 Scotch Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Scotch Creek.
Diversification Opportunities for Caterpillar and Scotch Creek
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Scotch is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Scotch Creek Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotch Creek Ventures 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 Scotch Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotch Creek Ventures has no effect on the direction of Caterpillar i.e., Caterpillar and Scotch Creek go up and down completely randomly.
Pair Corralation between Caterpillar and Scotch Creek
Considering the 90-day investment horizon Caterpillar is expected to generate 0.15 times more return on investment than Scotch Creek. However, Caterpillar is 6.6 times less risky than Scotch Creek. It trades about 0.08 of its potential returns per unit of risk. Scotch Creek Ventures is currently generating about -0.01 per unit of risk. If you would invest 22,712 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 17,539 from holding Caterpillar or generate 77.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Scotch Creek Ventures
Performance |
| Timeline |
| Caterpillar |
| Scotch Creek Ventures |
Caterpillar and Scotch Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Scotch Creek
The main advantage of trading using opposite Caterpillar and Scotch Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Scotch Creek 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 Scotch Creek will offset losses from the drop in Scotch Creek's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| Scotch Creek vs. Qubec Nickel Corp | Scotch Creek vs. IGO Limited | Scotch Creek vs. Avarone Metals | Scotch Creek vs. Adriatic Metals PLC |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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