Correlation Between Caterpillar and Shyft
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Shyft 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 Shyft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Shyft Group, you can compare the effects of market volatilities on Caterpillar and Shyft 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 Shyft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Shyft.
Diversification Opportunities for Caterpillar and Shyft
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Shyft is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Shyft Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyft Group 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 Shyft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyft Group has no effect on the direction of Caterpillar i.e., Caterpillar and Shyft go up and down completely randomly.
Pair Corralation between Caterpillar and Shyft
Considering the 90-day investment horizon Caterpillar is expected to generate 1.06 times less return on investment than Shyft. But when comparing it to its historical volatility, Caterpillar is 2.28 times less risky than Shyft. It trades about 0.1 of its potential returns per unit of risk. Shyft Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,174 in Shyft Group on November 1, 2024 and sell it today you would earn a total of 28.00 from holding Shyft Group or generate 2.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Shyft Group
Performance |
| Timeline |
| Caterpillar |
| Shyft Group |
Caterpillar and Shyft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Shyft
The main advantage of trading using opposite Caterpillar and Shyft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Shyft 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 Shyft will offset losses from the drop in Shyft's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Shyft vs. Astec Industries | Shyft vs. Hyster Yale Materials Handling | Shyft vs. Rev Group | Shyft vs. Lindsay |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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