Correlation Between Caterpillar and Appreciate Holdings
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Appreciate Holdings 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 Appreciate Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Appreciate Holdings, you can compare the effects of market volatilities on Caterpillar and Appreciate Holdings 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 Appreciate Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Appreciate Holdings.
Diversification Opportunities for Caterpillar and Appreciate Holdings
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Appreciate is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Appreciate Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appreciate Holdings 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 Appreciate Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appreciate Holdings has no effect on the direction of Caterpillar i.e., Caterpillar and Appreciate Holdings go up and down completely randomly.
Pair Corralation between Caterpillar and Appreciate Holdings
Considering the 90-day investment horizon Caterpillar is expected to generate 2.61 times less return on investment than Appreciate Holdings. But when comparing it to its historical volatility, Caterpillar is 6.97 times less risky than Appreciate Holdings. It trades about 0.1 of its potential returns per unit of risk. Appreciate Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Appreciate Holdings on August 31, 2024 and sell it today you would lose (1.00) from holding Appreciate Holdings or give up 3.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 8.56% |
| Values | Daily Returns |
Caterpillar vs. Appreciate Holdings
Performance |
| Timeline |
| Caterpillar |
| Appreciate Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Appreciate Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Appreciate Holdings
The main advantage of trading using opposite Caterpillar and Appreciate Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Appreciate Holdings 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 Appreciate Holdings will offset losses from the drop in Appreciate Holdings' long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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