Correlation Between Caterpillar and IShares Exponential
Can any of the company-specific risk be diversified away by investing in both Caterpillar and IShares Exponential 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 IShares Exponential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and iShares Exponential Technologies, you can compare the effects of market volatilities on Caterpillar and IShares Exponential 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 IShares Exponential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and IShares Exponential.
Diversification Opportunities for Caterpillar and IShares Exponential
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and iShares Exponential Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Exponential 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 IShares Exponential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Exponential has no effect on the direction of Caterpillar i.e., Caterpillar and IShares Exponential go up and down completely randomly.
Pair Corralation between Caterpillar and IShares Exponential
Considering the 90-day investment horizon Caterpillar is expected to generate 1.47 times more return on investment than IShares Exponential. However, Caterpillar is 1.47 times more volatile than iShares Exponential Technologies. It trades about 0.07 of its potential returns per unit of risk. iShares Exponential Technologies is currently generating about 0.04 per unit of risk. If you would invest 22,774 in Caterpillar on August 23, 2024 and sell it today you would earn a total of 16,185 from holding Caterpillar or generate 71.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. iShares Exponential Technologi
Performance |
| Timeline |
| Caterpillar |
| iShares Exponential |
Caterpillar and IShares Exponential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and IShares Exponential
The main advantage of trading using opposite Caterpillar and IShares Exponential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, IShares Exponential 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 IShares Exponential will offset losses from the drop in IShares Exponential's long position.| Caterpillar vs. Small Cap Core | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Mutual Of America | Caterpillar vs. Ep Emerging Markets |
| IShares Exponential vs. SPDR Kensho New | IShares Exponential vs. Global X FinTech | IShares Exponential vs. Invesco SP SmallCap | IShares Exponential vs. iShares Genomics Immunology |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |