Correlation Between Caterpillar and SPDR Kensho
Can any of the company-specific risk be diversified away by investing in both Caterpillar and SPDR Kensho 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 SPDR Kensho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and SPDR Kensho Future, you can compare the effects of market volatilities on Caterpillar and SPDR Kensho 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 SPDR Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and SPDR Kensho.
Diversification Opportunities for Caterpillar and SPDR Kensho
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future 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 SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Future has no effect on the direction of Caterpillar i.e., Caterpillar and SPDR Kensho go up and down completely randomly.
Pair Corralation between Caterpillar and SPDR Kensho
Considering the 90-day investment horizon Caterpillar is expected to generate 1.6 times more return on investment than SPDR Kensho. However, Caterpillar is 1.6 times more volatile than SPDR Kensho Future. It trades about 0.1 of its potential returns per unit of risk. SPDR Kensho Future is currently generating about 0.1 per unit of risk. If you would invest 22,843 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 17,768 from holding Caterpillar or generate 77.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Caterpillar vs. SPDR Kensho Future
Performance |
| Timeline |
| Caterpillar |
| SPDR Kensho Future |
Caterpillar and SPDR Kensho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and SPDR Kensho
The main advantage of trading using opposite Caterpillar and SPDR Kensho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, SPDR Kensho 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 SPDR Kensho will offset losses from the drop in SPDR Kensho's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
| SPDR Kensho vs. SPDR STOXX Europe | SPDR Kensho vs. SPDR Bloomberg Barclays | SPDR Kensho vs. SPDR Kensho Intelligent | SPDR Kensho vs. SPDR SP Kensho |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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