Correlation Between Caterpillar and Innovator Long
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Innovator Long 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 Innovator Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Innovator Long Term, you can compare the effects of market volatilities on Caterpillar and Innovator Long 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 Innovator Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Innovator Long.
Diversification Opportunities for Caterpillar and Innovator Long
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Innovator is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Innovator Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Long Term 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 Innovator Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Long Term has no effect on the direction of Caterpillar i.e., Caterpillar and Innovator Long go up and down completely randomly.
Pair Corralation between Caterpillar and Innovator Long
Considering the 90-day investment horizon Caterpillar is expected to generate 2.66 times more return on investment than Innovator Long. However, Caterpillar is 2.66 times more volatile than Innovator Long Term. It trades about 0.07 of its potential returns per unit of risk. Innovator Long Term is currently generating about 0.02 per unit of risk. If you would invest 34,383 in Caterpillar on August 26, 2024 and sell it today you would earn a total of 5,366 from holding Caterpillar or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Innovator Long Term
Performance |
| Timeline |
| Caterpillar |
| Innovator Long Term |
Caterpillar and Innovator Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Innovator Long
The main advantage of trading using opposite Caterpillar and Innovator Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Innovator Long 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 Innovator Long will offset losses from the drop in Innovator Long's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Innovator Long vs. First Trust Cboe | Innovator Long vs. FT Cboe Vest | Innovator Long vs. Innovator SP 500 | Innovator Long vs. FT Cboe Vest |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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