Correlation Between Daimler Truck and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Daimler Truck 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 Daimler Truck and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daimler Truck Holding and Caterpillar, you can compare the effects of market volatilities on Daimler Truck 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 Daimler Truck with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daimler Truck and Caterpillar.
Diversification Opportunities for Daimler Truck and Caterpillar
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daimler and Caterpillar is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Daimler Truck Holding and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Daimler Truck 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 Daimler Truck Holding 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 Daimler Truck i.e., Daimler Truck and Caterpillar go up and down completely randomly.
Pair Corralation between Daimler Truck and Caterpillar
Assuming the 90 days horizon Daimler Truck Holding is expected to generate 1.76 times more return on investment than Caterpillar. However, Daimler Truck is 1.76 times more volatile than Caterpillar. It trades about 0.12 of its potential returns per unit of risk. Caterpillar is currently generating about -0.44 per unit of risk. If you would invest 2,103 in Daimler Truck Holding on November 28, 2024 and sell it today you would earn a total of 128.00 from holding Daimler Truck Holding or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Daimler Truck Holding vs. Caterpillar
Performance |
| Timeline |
| Daimler Truck Holding |
| Caterpillar |
Daimler Truck and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daimler Truck and Caterpillar
The main advantage of trading using opposite Daimler Truck and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daimler Truck 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.| Daimler Truck vs. Volvo AB ADR | Daimler Truck vs. Deere Company | Daimler Truck vs. Volvo AB ser | Daimler Truck vs. Oshkosh |
| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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