Correlation Between Caterpillar and WELLTOWER

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Can any of the company-specific risk be diversified away by investing in both Caterpillar and WELLTOWER 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 WELLTOWER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and WELLTOWER INC 425, you can compare the effects of market volatilities on Caterpillar and WELLTOWER 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 WELLTOWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and WELLTOWER.

Diversification Opportunities for Caterpillar and WELLTOWER

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Caterpillar and WELLTOWER is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and WELLTOWER INC 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLTOWER INC 425 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 WELLTOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELLTOWER INC 425 has no effect on the direction of Caterpillar i.e., Caterpillar and WELLTOWER go up and down completely randomly.

Pair Corralation between Caterpillar and WELLTOWER

Considering the 90-day investment horizon Caterpillar is expected to generate 3.08 times more return on investment than WELLTOWER. However, Caterpillar is 3.08 times more volatile than WELLTOWER INC 425. It trades about 0.07 of its potential returns per unit of risk. WELLTOWER INC 425 is currently generating about 0.01 per unit of risk. If you would invest  23,785  in Caterpillar on August 31, 2024 and sell it today you would earn a total of  16,826  from holding Caterpillar or generate 70.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.33%
ValuesDaily Returns

Caterpillar  vs.  WELLTOWER INC 425

 Performance 
       Timeline  
Caterpillar 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.
WELLTOWER INC 425 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days WELLTOWER INC 425 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WELLTOWER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Caterpillar and WELLTOWER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and WELLTOWER

The main advantage of trading using opposite Caterpillar and WELLTOWER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, WELLTOWER 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 WELLTOWER will offset losses from the drop in WELLTOWER's long position.
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The idea behind Caterpillar and WELLTOWER INC 425 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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