Correlation Between Caterpillar and Invesco PHLX
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Invesco PHLX 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 Invesco PHLX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Invesco PHLX Semiconductor, you can compare the effects of market volatilities on Caterpillar and Invesco PHLX 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 Invesco PHLX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Invesco PHLX.
Diversification Opportunities for Caterpillar and Invesco PHLX
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Caterpillar and Invesco is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Invesco PHLX Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco PHLX Semicon 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 Invesco PHLX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco PHLX Semicon has no effect on the direction of Caterpillar i.e., Caterpillar and Invesco PHLX go up and down completely randomly.
Pair Corralation between Caterpillar and Invesco PHLX
Considering the 90-day investment horizon Caterpillar is expected to generate 0.83 times more return on investment than Invesco PHLX. However, Caterpillar is 1.21 times less risky than Invesco PHLX. It trades about -0.01 of its potential returns per unit of risk. Invesco PHLX Semiconductor is currently generating about -0.01 per unit of risk. If you would invest 35,353 in Caterpillar on November 28, 2024 and sell it today you would lose (1,117) from holding Caterpillar or give up 3.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Invesco PHLX Semiconductor
Performance |
| Timeline |
| Caterpillar |
| Invesco PHLX Semicon |
Caterpillar and Invesco PHLX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Invesco PHLX
The main advantage of trading using opposite Caterpillar and Invesco PHLX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Invesco PHLX 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 Invesco PHLX will offset losses from the drop in Invesco PHLX's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
| Invesco PHLX vs. Invesco Nasdaq Biotechnology | Invesco PHLX vs. First Trust Nasdaq | Invesco PHLX vs. SPDR SP Semiconductor | Invesco PHLX vs. Invesco Dynamic Semiconductors |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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