Correlation Between Caterpillar and MICROSOFT
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By analyzing existing cross correlation between Caterpillar and MICROSOFT PORATION, you can compare the effects of market volatilities on Caterpillar and MICROSOFT 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 MICROSOFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and MICROSOFT.
Diversification Opportunities for Caterpillar and MICROSOFT
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and MICROSOFT is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and MICROSOFT PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICROSOFT PORATION 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 MICROSOFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MICROSOFT PORATION has no effect on the direction of Caterpillar i.e., Caterpillar and MICROSOFT go up and down completely randomly.
Pair Corralation between Caterpillar and MICROSOFT
Considering the 90-day investment horizon Caterpillar is expected to generate 2.01 times more return on investment than MICROSOFT. However, Caterpillar is 2.01 times more volatile than MICROSOFT PORATION. It trades about 0.12 of its potential returns per unit of risk. MICROSOFT PORATION is currently generating about 0.15 per unit of risk. If you would invest 37,652 in Caterpillar on September 5, 2024 and sell it today you would earn a total of 2,274 from holding Caterpillar or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Caterpillar vs. MICROSOFT PORATION
Performance |
| Timeline |
| Caterpillar |
| MICROSOFT PORATION |
Caterpillar and MICROSOFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and MICROSOFT
The main advantage of trading using opposite Caterpillar and MICROSOFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, MICROSOFT 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 MICROSOFT will offset losses from the drop in MICROSOFT's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
| MICROSOFT vs. Summit Materials | MICROSOFT vs. IPG Photonics | MICROSOFT vs. Weyco Group | MICROSOFT vs. Designer Brands |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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