Correlation Between Caterpillar and Syrah Resources
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Syrah Resources 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 Syrah Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Syrah Resources Limited, you can compare the effects of market volatilities on Caterpillar and Syrah Resources 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 Syrah Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Syrah Resources.
Diversification Opportunities for Caterpillar and Syrah Resources
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Caterpillar and Syrah is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Syrah Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syrah Resources 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 Syrah Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syrah Resources has no effect on the direction of Caterpillar i.e., Caterpillar and Syrah Resources go up and down completely randomly.
Pair Corralation between Caterpillar and Syrah Resources
Considering the 90-day investment horizon Caterpillar is expected to generate 0.23 times more return on investment than Syrah Resources. However, Caterpillar is 4.38 times less risky than Syrah Resources. It trades about 0.12 of its potential returns per unit of risk. Syrah Resources Limited is currently generating about -0.03 per unit of risk. If you would invest 25,540 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 15,071 from holding Caterpillar or generate 59.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Syrah Resources Limited
Performance |
| Timeline |
| Caterpillar |
| Syrah Resources |
Caterpillar and Syrah Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Syrah Resources
The main advantage of trading using opposite Caterpillar and Syrah Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Syrah Resources 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 Syrah Resources will offset losses from the drop in Syrah Resources' long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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