Correlation Between Caterpillar and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Goldman Sachs 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 Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Goldman Sachs Tactical, you can compare the effects of market volatilities on Caterpillar and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Goldman Sachs.
Diversification Opportunities for Caterpillar and Goldman Sachs
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Goldman is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Goldman Sachs Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Tactical 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Tactical has no effect on the direction of Caterpillar i.e., Caterpillar and Goldman Sachs go up and down completely randomly.
Pair Corralation between Caterpillar and Goldman Sachs
Considering the 90-day investment horizon Caterpillar is expected to generate 19.26 times more return on investment than Goldman Sachs. However, Caterpillar is 19.26 times more volatile than Goldman Sachs Tactical. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Tactical is currently generating about -0.03 per unit of risk. If you would invest 39,061 in Caterpillar on August 29, 2024 and sell it today you would earn a total of 1,722 from holding Caterpillar or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Goldman Sachs Tactical
Performance |
| Timeline |
| Caterpillar |
| Goldman Sachs Tactical |
Caterpillar and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Goldman Sachs
The main advantage of trading using opposite Caterpillar and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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