Correlation Between Caterpillar and Silver Elephant
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Silver Elephant 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 Silver Elephant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Silver Elephant Mining, you can compare the effects of market volatilities on Caterpillar and Silver Elephant 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 Silver Elephant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Silver Elephant.
Diversification Opportunities for Caterpillar and Silver Elephant
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Caterpillar and Silver is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Silver Elephant Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Elephant Mining 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 Silver Elephant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Elephant Mining has no effect on the direction of Caterpillar i.e., Caterpillar and Silver Elephant go up and down completely randomly.
Pair Corralation between Caterpillar and Silver Elephant
Considering the 90-day investment horizon Caterpillar is expected to generate 0.35 times more return on investment than Silver Elephant. However, Caterpillar is 2.83 times less risky than Silver Elephant. It trades about 0.16 of its potential returns per unit of risk. Silver Elephant Mining is currently generating about -0.08 per unit of risk. If you would invest 37,620 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 2,991 from holding Caterpillar or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Silver Elephant Mining
Performance |
| Timeline |
| Caterpillar |
| Silver Elephant Mining |
Caterpillar and Silver Elephant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Silver Elephant
The main advantage of trading using opposite Caterpillar and Silver Elephant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Silver Elephant 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 Silver Elephant will offset losses from the drop in Silver Elephant's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Silver Elephant vs. ATT Inc | Silver Elephant vs. Merck Company | Silver Elephant vs. Walt Disney | Silver Elephant vs. Caterpillar |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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