Correlation Between Ep Emerging and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Ep Emerging 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 Ep Emerging and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ep Emerging Markets and Caterpillar, you can compare the effects of market volatilities on Ep Emerging 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 Ep Emerging with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ep Emerging and Caterpillar.
Diversification Opportunities for Ep Emerging and Caterpillar
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EPASX and Caterpillar is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ep Emerging Markets and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Ep Emerging 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 Ep Emerging Markets 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 Ep Emerging i.e., Ep Emerging and Caterpillar go up and down completely randomly.
Pair Corralation between Ep Emerging and Caterpillar
Assuming the 90 days horizon Ep Emerging is expected to generate 5.03 times less return on investment than Caterpillar. But when comparing it to its historical volatility, Ep Emerging Markets is 2.11 times less risky than Caterpillar. It trades about 0.03 of its potential returns per unit of risk. Caterpillar is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 33,021 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 6,728 from holding Caterpillar or generate 20.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ep Emerging Markets vs. Caterpillar
Performance |
| Timeline |
| Ep Emerging Markets |
| Caterpillar |
Ep Emerging and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ep Emerging and Caterpillar
The main advantage of trading using opposite Ep Emerging and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ep Emerging 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.| Ep Emerging vs. Fidelity Series Government | Ep Emerging vs. Government Securities Fund | Ep Emerging vs. Short Term Government Fund | Ep Emerging vs. Us Government Securities |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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