Correlation Between Caterpillar and NSTAR
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By analyzing existing cross correlation between Caterpillar and NSTAR ELEC 44, you can compare the effects of market volatilities on Caterpillar and NSTAR 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 NSTAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and NSTAR.
Diversification Opportunities for Caterpillar and NSTAR
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and NSTAR is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and NSTAR ELEC 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR ELEC 44 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 NSTAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR ELEC 44 has no effect on the direction of Caterpillar i.e., Caterpillar and NSTAR go up and down completely randomly.
Pair Corralation between Caterpillar and NSTAR
Considering the 90-day investment horizon Caterpillar is expected to generate 1.67 times more return on investment than NSTAR. However, Caterpillar is 1.67 times more volatile than NSTAR ELEC 44. It trades about 0.1 of its potential returns per unit of risk. NSTAR ELEC 44 is currently generating about 0.04 per unit of risk. If you would invest 32,883 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 7,728 from holding Caterpillar or generate 23.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 45.24% |
| Values | Daily Returns |
Caterpillar vs. NSTAR ELEC 44
Performance |
| Timeline |
| Caterpillar |
| NSTAR ELEC 44 |
Caterpillar and NSTAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and NSTAR
The main advantage of trading using opposite Caterpillar and NSTAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, NSTAR 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 NSTAR will offset losses from the drop in NSTAR's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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