Correlation Between Caterpillar and 1933 Industries
Can any of the company-specific risk be diversified away by investing in both Caterpillar and 1933 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 1933 Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and 1933 Industries, you can compare the effects of market volatilities on Caterpillar and 1933 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 1933 Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and 1933 Industries.
Diversification Opportunities for Caterpillar and 1933 Industries
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and 1933 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and 1933 Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1933 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 1933 Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1933 Industries has no effect on the direction of Caterpillar i.e., Caterpillar and 1933 Industries go up and down completely randomly.
Pair Corralation between Caterpillar and 1933 Industries
Considering the 90-day investment horizon Caterpillar is expected to generate 9.35 times less return on investment than 1933 Industries. But when comparing it to its historical volatility, Caterpillar is 8.7 times less risky than 1933 Industries. It trades about 0.07 of its potential returns per unit of risk. 1933 Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.59 in 1933 Industries on August 29, 2024 and sell it today you would lose (0.04) from holding 1933 Industries or give up 6.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. 1933 Industries
Performance |
| Timeline |
| Caterpillar |
| 1933 Industries |
Caterpillar and 1933 Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and 1933 Industries
The main advantage of trading using opposite Caterpillar and 1933 Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, 1933 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 1933 Industries will offset losses from the drop in 1933 Industries' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| 1933 Industries vs. Green Cures Botanical | 1933 Industries vs. Cann American Corp | 1933 Industries vs. Rimrock Gold Corp | 1933 Industries vs. Galexxy Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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