Correlation Between Caterpillar and Sanwire
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Sanwire 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 Sanwire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Sanwire, you can compare the effects of market volatilities on Caterpillar and Sanwire 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 Sanwire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Sanwire.
Diversification Opportunities for Caterpillar and Sanwire
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Sanwire is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Sanwire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanwire 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 Sanwire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanwire has no effect on the direction of Caterpillar i.e., Caterpillar and Sanwire go up and down completely randomly.
Pair Corralation between Caterpillar and Sanwire
Considering the 90-day investment horizon Caterpillar is expected to generate 14.35 times less return on investment than Sanwire. But when comparing it to its historical volatility, Caterpillar is 14.39 times less risky than Sanwire. It trades about 0.08 of its potential returns per unit of risk. Sanwire is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.60 in Sanwire on August 29, 2024 and sell it today you would lose (0.56) from holding Sanwire or give up 93.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.73% |
| Values | Daily Returns |
Caterpillar vs. Sanwire
Performance |
| Timeline |
| Caterpillar |
| Sanwire |
Caterpillar and Sanwire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Sanwire
The main advantage of trading using opposite Caterpillar and Sanwire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Sanwire 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 Sanwire will offset losses from the drop in Sanwire's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Sanwire vs. SNM Gobal Holdings | Sanwire vs. All For One | Sanwire vs. Ggtoor Inc | Sanwire vs. Hanover House |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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