Correlation Between Caterpillar and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Invesco SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Invesco SP 500, you can compare the effects of market volatilities on Caterpillar and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Invesco SP.
Diversification Opportunities for Caterpillar and Invesco SP
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Invesco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Caterpillar i.e., Caterpillar and Invesco SP go up and down completely randomly.
Pair Corralation between Caterpillar and Invesco SP
Considering the 90-day investment horizon Caterpillar is expected to generate 1.26 times more return on investment than Invesco SP. However, Caterpillar is 1.26 times more volatile than Invesco SP 500. It trades about 0.08 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.06 per unit of risk. If you would invest 22,271 in Caterpillar on August 29, 2024 and sell it today you would earn a total of 18,512 from holding Caterpillar or generate 83.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Invesco SP 500
Performance |
| Timeline |
| Caterpillar |
| Invesco SP 500 |
Caterpillar and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Invesco SP
The main advantage of trading using opposite Caterpillar and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Invesco SP vs. Invesco SP 500 | Invesco SP vs. Invesco SP 500 | Invesco SP vs. Invesco SP 500 | Invesco SP vs. iShares MSCI USA |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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