Correlation Between Caterpillar and ToughBuilt Industries
Can any of the company-specific risk be diversified away by investing in both Caterpillar and ToughBuilt Industries 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 ToughBuilt Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and ToughBuilt Industries WT, you can compare the effects of market volatilities on Caterpillar and ToughBuilt Industries 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 ToughBuilt Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and ToughBuilt Industries.
Diversification Opportunities for Caterpillar and ToughBuilt Industries
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and ToughBuilt is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ToughBuilt Industries WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ToughBuilt Industries 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 ToughBuilt Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ToughBuilt Industries has no effect on the direction of Caterpillar i.e., Caterpillar and ToughBuilt Industries go up and down completely randomly.
Pair Corralation between Caterpillar and ToughBuilt Industries
If you would invest 25,335 in Caterpillar on September 2, 2024 and sell it today you would earn a total of 15,276 from holding Caterpillar or generate 60.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 0.4% |
| Values | Daily Returns |
Caterpillar vs. ToughBuilt Industries WT
Performance |
| Timeline |
| Caterpillar |
| ToughBuilt Industries |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and ToughBuilt Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and ToughBuilt Industries
The main advantage of trading using opposite Caterpillar and ToughBuilt Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, ToughBuilt Industries 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 ToughBuilt Industries will offset losses from the drop in ToughBuilt Industries' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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