Correlation Between Caterpillar and AMERICAN
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By analyzing existing cross correlation between Caterpillar and AMERICAN HOMES 4, you can compare the effects of market volatilities on Caterpillar and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and AMERICAN.
Diversification Opportunities for Caterpillar and AMERICAN
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and AMERICAN is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and AMERICAN HOMES 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN HOMES 4 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN HOMES 4 has no effect on the direction of Caterpillar i.e., Caterpillar and AMERICAN go up and down completely randomly.
Pair Corralation between Caterpillar and AMERICAN
Considering the 90-day investment horizon Caterpillar is expected to generate 3.45 times more return on investment than AMERICAN. However, Caterpillar is 3.45 times more volatile than AMERICAN HOMES 4. It trades about 0.17 of its potential returns per unit of risk. AMERICAN HOMES 4 is currently generating about -0.15 per unit of risk. If you would invest 37,652 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 2,959 from holding Caterpillar or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Caterpillar vs. AMERICAN HOMES 4
Performance |
| Timeline |
| Caterpillar |
| AMERICAN HOMES 4 |
Caterpillar and AMERICAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and AMERICAN
The main advantage of trading using opposite Caterpillar and AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, AMERICAN 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 AMERICAN will offset losses from the drop in AMERICAN's long position.| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
| AMERICAN vs. AEP TEX INC | AMERICAN vs. US BANK NATIONAL | AMERICAN vs. Jackson Financial | AMERICAN vs. MetLife |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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