Correlation Between Caterpillar and God Bless
Can any of the company-specific risk be diversified away by investing in both Caterpillar and God Bless 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 God Bless into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and God Bless America, you can compare the effects of market volatilities on Caterpillar and God Bless 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 God Bless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and God Bless.
Diversification Opportunities for Caterpillar and God Bless
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and God is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and God Bless America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on God Bless America 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 God Bless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of God Bless America has no effect on the direction of Caterpillar i.e., Caterpillar and God Bless go up and down completely randomly.
Pair Corralation between Caterpillar and God Bless
Considering the 90-day investment horizon Caterpillar is expected to generate 1.77 times more return on investment than God Bless. However, Caterpillar is 1.77 times more volatile than God Bless America. It trades about 0.08 of its potential returns per unit of risk. God Bless America is currently generating about 0.13 per unit of risk. If you would invest 22,246 in Caterpillar on September 5, 2024 and sell it today you would earn a total of 17,680 from holding Caterpillar or generate 79.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. God Bless America
Performance |
| Timeline |
| Caterpillar |
| God Bless America |
Caterpillar and God Bless Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and God Bless
The main advantage of trading using opposite Caterpillar and God Bless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, God Bless 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 God Bless will offset losses from the drop in God Bless' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
| God Bless vs. Vanguard Total Stock | God Bless vs. SPDR SP 500 | God Bless vs. iShares Core SP | God Bless vs. Vanguard Dividend Appreciation |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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