Correlation Between Caterpillar and Smart Global
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Smart Global 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 Smart Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Smart Global Holdings, you can compare the effects of market volatilities on Caterpillar and Smart Global 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 Smart Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Smart Global.
Diversification Opportunities for Caterpillar and Smart Global
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and Smart is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Smart Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Global 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 Smart Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Global Holdings has no effect on the direction of Caterpillar i.e., Caterpillar and Smart Global go up and down completely randomly.
Pair Corralation between Caterpillar and Smart Global
If you would invest 39,061 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 688.00 from holding Caterpillar or generate 1.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Caterpillar vs. Smart Global Holdings
Performance |
| Timeline |
| Caterpillar |
| Smart Global Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Caterpillar and Smart Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Smart Global
The main advantage of trading using opposite Caterpillar and Smart Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Smart Global 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 Smart Global will offset losses from the drop in Smart Global's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Smart Global vs. Silicon Motion Technology | Smart Global vs. MACOM Technology Solutions | Smart Global vs. Semtech | Smart Global vs. Alpha and Omega |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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