Correlation Between Caterpillar and Vertex Energy
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Vertex Energy 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 Vertex Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Vertex Energy, you can compare the effects of market volatilities on Caterpillar and Vertex Energy 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 Vertex Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Vertex Energy.
Diversification Opportunities for Caterpillar and Vertex Energy
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and Vertex is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Vertex Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Energy 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 Vertex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Energy has no effect on the direction of Caterpillar i.e., Caterpillar and Vertex Energy go up and down completely randomly.
Pair Corralation between Caterpillar and Vertex Energy
Considering the 90-day investment horizon Caterpillar is expected to generate 7.59 times less return on investment than Vertex Energy. But when comparing it to its historical volatility, Caterpillar is 4.3 times less risky than Vertex Energy. It trades about 0.08 of its potential returns per unit of risk. Vertex Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5.20 in Vertex Energy on August 28, 2024 and sell it today you would earn a total of 1.30 from holding Vertex Energy or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Vertex Energy
Performance |
| Timeline |
| Caterpillar |
| Vertex Energy |
Caterpillar and Vertex Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Vertex Energy
The main advantage of trading using opposite Caterpillar and Vertex Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Vertex Energy 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 Vertex Energy will offset losses from the drop in Vertex Energy's long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Vertex Energy vs. Clean Energy Fuels | Vertex Energy vs. Icahn Enterprises LP | Vertex Energy vs. PBF Energy | Vertex Energy vs. Delek Logistics Partners |
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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