Correlation Between Caterpillar and Sprott Junior
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Sprott Junior 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 Sprott Junior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Sprott Junior Uranium, you can compare the effects of market volatilities on Caterpillar and Sprott Junior 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 Sprott Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Sprott Junior.
Diversification Opportunities for Caterpillar and Sprott Junior
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Sprott is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Sprott Junior Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Junior Uranium 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 Sprott Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Junior Uranium has no effect on the direction of Caterpillar i.e., Caterpillar and Sprott Junior go up and down completely randomly.
Pair Corralation between Caterpillar and Sprott Junior
Considering the 90-day investment horizon Caterpillar is expected to generate 0.82 times more return on investment than Sprott Junior. However, Caterpillar is 1.22 times less risky than Sprott Junior. It trades about 0.13 of its potential returns per unit of risk. Sprott Junior Uranium is currently generating about -0.03 per unit of risk. If you would invest 37,924 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 2,446 from holding Caterpillar or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Sprott Junior Uranium
Performance |
| Timeline |
| Caterpillar |
| Sprott Junior Uranium |
Caterpillar and Sprott Junior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Sprott Junior
The main advantage of trading using opposite Caterpillar and Sprott Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Sprott Junior 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 Sprott Junior will offset losses from the drop in Sprott Junior's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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