Correlation Between Caterpillar and SPDR Morgan
Can any of the company-specific risk be diversified away by investing in both Caterpillar and SPDR Morgan 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 Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and SPDR Morgan Stanley, you can compare the effects of market volatilities on Caterpillar and SPDR Morgan 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 Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and SPDR Morgan.
Diversification Opportunities for Caterpillar and SPDR Morgan
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Caterpillar and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley 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 Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of Caterpillar i.e., Caterpillar and SPDR Morgan go up and down completely randomly.
Pair Corralation between Caterpillar and SPDR Morgan
Considering the 90-day investment horizon Caterpillar is expected to generate 2.03 times more return on investment than SPDR Morgan. However, Caterpillar is 2.03 times more volatile than SPDR Morgan Stanley. It trades about 0.09 of its potential returns per unit of risk. SPDR Morgan Stanley is currently generating about 0.03 per unit of risk. If you would invest 38,751 in Caterpillar on August 30, 2024 and sell it today you would earn a total of 1,619 from holding Caterpillar or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Caterpillar vs. SPDR Morgan Stanley
Performance |
| Timeline |
| Caterpillar |
| SPDR Morgan Stanley |
Caterpillar and SPDR Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and SPDR Morgan
The main advantage of trading using opposite Caterpillar and SPDR Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, SPDR Morgan 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 Morgan will offset losses from the drop in SPDR Morgan's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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