Correlation Between Caterpillar and Techtronic Industries
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Techtronic 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 Techtronic Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Techtronic Industries Ltd, you can compare the effects of market volatilities on Caterpillar and Techtronic 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 Techtronic Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Techtronic Industries.
Diversification Opportunities for Caterpillar and Techtronic Industries
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Techtronic is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Techtronic Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic 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 Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of Caterpillar i.e., Caterpillar and Techtronic Industries go up and down completely randomly.
Pair Corralation between Caterpillar and Techtronic Industries
Considering the 90-day investment horizon Caterpillar is expected to generate 1.77 times more return on investment than Techtronic Industries. However, Caterpillar is 1.77 times more volatile than Techtronic Industries Ltd. It trades about 0.08 of its potential returns per unit of risk. Techtronic Industries Ltd is currently generating about -0.23 per unit of risk. If you would invest 39,061 in Caterpillar on August 28, 2024 and sell it today you would earn a total of 1,504 from holding Caterpillar or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Techtronic Industries Ltd
Performance |
| Timeline |
| Caterpillar |
| Techtronic Industries |
Caterpillar and Techtronic Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Techtronic Industries
The main advantage of trading using opposite Caterpillar and Techtronic Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Techtronic 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 Techtronic Industries will offset losses from the drop in Techtronic Industries' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Techtronic Industries vs. SMC Corp Japan | Techtronic Industries vs. Hong Kong Exchange | Techtronic Industries vs. AIA Group Ltd | Techtronic Industries vs. Techtronic Industries |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Global Correlations Find global opportunities by holding instruments from different markets |