Correlation Between Caterpillar and Tscan Therapeutics
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Tscan Therapeutics 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 Tscan Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Tscan Therapeutics, you can compare the effects of market volatilities on Caterpillar and Tscan Therapeutics 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 Tscan Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Tscan Therapeutics.
Diversification Opportunities for Caterpillar and Tscan Therapeutics
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Tscan is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Tscan Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tscan Therapeutics 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 Tscan Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tscan Therapeutics has no effect on the direction of Caterpillar i.e., Caterpillar and Tscan Therapeutics go up and down completely randomly.
Pair Corralation between Caterpillar and Tscan Therapeutics
Considering the 90-day investment horizon Caterpillar is expected to generate 0.46 times more return on investment than Tscan Therapeutics. However, Caterpillar is 2.16 times less risky than Tscan Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Tscan Therapeutics is currently generating about 0.03 per unit of risk. If you would invest 37,924 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 2,446 from holding Caterpillar or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Tscan Therapeutics
Performance |
| Timeline |
| Caterpillar |
| Tscan Therapeutics |
Caterpillar and Tscan Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Tscan Therapeutics
The main advantage of trading using opposite Caterpillar and Tscan Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Tscan Therapeutics 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 Tscan Therapeutics will offset losses from the drop in Tscan Therapeutics' long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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