Correlation Between Caterpillar and SoFi Social
Can any of the company-specific risk be diversified away by investing in both Caterpillar and SoFi Social 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 SoFi Social into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and SoFi Social 50, you can compare the effects of market volatilities on Caterpillar and SoFi Social 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 SoFi Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and SoFi Social.
Diversification Opportunities for Caterpillar and SoFi Social
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and SoFi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and SoFi Social 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Social 50 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 SoFi Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Social 50 has no effect on the direction of Caterpillar i.e., Caterpillar and SoFi Social go up and down completely randomly.
Pair Corralation between Caterpillar and SoFi Social
Considering the 90-day investment horizon Caterpillar is expected to generate 1.55 times less return on investment than SoFi Social. In addition to that, Caterpillar is 1.8 times more volatile than SoFi Social 50. It trades about 0.16 of its total potential returns per unit of risk. SoFi Social 50 is currently generating about 0.46 per unit of volatility. If you would invest 3,760 in SoFi Social 50 on September 1, 2024 and sell it today you would earn a total of 501.00 from holding SoFi Social 50 or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. SoFi Social 50
Performance |
| Timeline |
| Caterpillar |
| SoFi Social 50 |
Caterpillar and SoFi Social Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and SoFi Social
The main advantage of trading using opposite Caterpillar and SoFi Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, SoFi Social 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 SoFi Social will offset losses from the drop in SoFi Social's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |