Correlation Between Caterpillar and Yokohama Rubber
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Yokohama Rubber 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 Yokohama Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and The Yokohama Rubber, you can compare the effects of market volatilities on Caterpillar and Yokohama Rubber 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 Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Yokohama Rubber.
Diversification Opportunities for Caterpillar and Yokohama Rubber
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Yokohama is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Caterpillar i.e., Caterpillar and Yokohama Rubber go up and down completely randomly.
Pair Corralation between Caterpillar and Yokohama Rubber
If you would invest 37,652 in Caterpillar on September 4, 2024 and sell it today you would earn a total of 2,599 from holding Caterpillar or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Caterpillar vs. The Yokohama Rubber
Performance |
| Timeline |
| Caterpillar |
| Yokohama Rubber |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Yokohama Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Yokohama Rubber
The main advantage of trading using opposite Caterpillar and Yokohama Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Yokohama Rubber 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 Yokohama Rubber will offset losses from the drop in Yokohama Rubber's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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