Correlation Between Caterpillar and Touchstone Focused
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Touchstone Focused 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 Touchstone Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Touchstone Focused Fund, you can compare the effects of market volatilities on Caterpillar and Touchstone Focused 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 Touchstone Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Touchstone Focused.
Diversification Opportunities for Caterpillar and Touchstone Focused
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Touchstone is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Touchstone Focused Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Focused 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 Touchstone Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Focused has no effect on the direction of Caterpillar i.e., Caterpillar and Touchstone Focused go up and down completely randomly.
Pair Corralation between Caterpillar and Touchstone Focused
Considering the 90-day investment horizon Caterpillar is expected to generate 2.38 times more return on investment than Touchstone Focused. However, Caterpillar is 2.38 times more volatile than Touchstone Focused Fund. It trades about 0.12 of its potential returns per unit of risk. Touchstone Focused Fund is currently generating about 0.13 per unit of risk. If you would invest 24,359 in Caterpillar on August 24, 2024 and sell it today you would earn a total of 15,226 from holding Caterpillar or generate 62.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Touchstone Focused Fund
Performance |
| Timeline |
| Caterpillar |
| Touchstone Focused |
Caterpillar and Touchstone Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Touchstone Focused
The main advantage of trading using opposite Caterpillar and Touchstone Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Touchstone Focused 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 Touchstone Focused will offset losses from the drop in Touchstone Focused's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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