Correlation Between Caterpillar and Themes Small
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Themes Small 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 Themes Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Themes Small Cap, you can compare the effects of market volatilities on Caterpillar and Themes Small 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 Themes Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Themes Small.
Diversification Opportunities for Caterpillar and Themes Small
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Themes is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Themes Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Small Cap 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 Themes Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Small Cap has no effect on the direction of Caterpillar i.e., Caterpillar and Themes Small go up and down completely randomly.
Pair Corralation between Caterpillar and Themes Small
Considering the 90-day investment horizon Caterpillar is expected to generate 1.47 times less return on investment than Themes Small. In addition to that, Caterpillar is 2.44 times more volatile than Themes Small Cap. It trades about 0.09 of its total potential returns per unit of risk. Themes Small Cap is currently generating about 0.32 per unit of volatility. If you would invest 3,104 in Themes Small Cap on November 1, 2024 and sell it today you would earn a total of 175.00 from holding Themes Small Cap or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Themes Small Cap
Performance |
| Timeline |
| Caterpillar |
| Themes Small Cap |
Caterpillar and Themes Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Themes Small
The main advantage of trading using opposite Caterpillar and Themes Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Themes Small 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 Themes Small will offset losses from the drop in Themes Small's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Themes Small vs. Dimensional ETF Trust | Themes Small vs. Vanguard Small Cap Index | Themes Small vs. First Trust Multi Manager | Themes Small vs. Vanguard SP Small Cap |
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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