Correlation Between Strategic Investments and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Strategic Investments and Caterpillar 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 Strategic Investments and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Investments AS and Caterpillar, you can compare the effects of market volatilities on Strategic Investments and Caterpillar 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 Strategic Investments with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Investments and Caterpillar.
Diversification Opportunities for Strategic Investments and Caterpillar
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Strategic and Caterpillar is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Strategic Investments 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 Strategic Investments AS are associated (or correlated) with Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Strategic Investments i.e., Strategic Investments and Caterpillar go up and down completely randomly.
Pair Corralation between Strategic Investments and Caterpillar
Assuming the 90 days horizon Strategic Investments is expected to generate 2.77 times less return on investment than Caterpillar. In addition to that, Strategic Investments is 2.21 times more volatile than Caterpillar. It trades about 0.02 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.12 per unit of volatility. If you would invest 23,198 in Caterpillar on September 2, 2024 and sell it today you would earn a total of 15,402 from holding Caterpillar or generate 66.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Investments AS vs. Caterpillar
Performance |
| Timeline |
| Strategic Investments |
| Caterpillar |
Strategic Investments and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Investments and Caterpillar
The main advantage of trading using opposite Strategic Investments and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.| Strategic Investments vs. Lifeway Foods | Strategic Investments vs. HOCHSCHILD MINING | Strategic Investments vs. THAI BEVERAGE | Strategic Investments vs. Collins Foods Limited |
| Caterpillar vs. GREENX METALS LTD | Caterpillar vs. PLAYSTUDIOS A DL 0001 | Caterpillar vs. FIREWEED METALS P | Caterpillar vs. ADRIATIC METALS LS 013355 |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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