Correlation Between Epiroc AB and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Epiroc AB 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 Epiroc AB and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Epiroc AB and Caterpillar, you can compare the effects of market volatilities on Epiroc AB 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 Epiroc AB with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epiroc AB and Caterpillar.
Diversification Opportunities for Epiroc AB and Caterpillar
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Epiroc and Caterpillar is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Epiroc AB and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Epiroc AB 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 Epiroc AB 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 Epiroc AB i.e., Epiroc AB and Caterpillar go up and down completely randomly.
Pair Corralation between Epiroc AB and Caterpillar
Assuming the 90 days horizon Epiroc AB is expected to under-perform the Caterpillar. In addition to that, Epiroc AB is 1.1 times more volatile than Caterpillar. It trades about 0.0 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.08 per unit of volatility. If you would invest 33,949 in Caterpillar on September 3, 2024 and sell it today you would earn a total of 6,662 from holding Caterpillar or generate 19.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Epiroc AB vs. Caterpillar
Performance |
| Timeline |
| Epiroc AB |
| Caterpillar |
Epiroc AB and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epiroc AB and Caterpillar
The main advantage of trading using opposite Epiroc AB and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epiroc AB 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.| Epiroc AB vs. Caterpillar | Epiroc AB vs. AGCO Corporation | Epiroc AB vs. Nikola Corp | Epiroc AB vs. PACCAR Inc |
| Caterpillar vs. Partner Communications | Caterpillar vs. Merck Company | Caterpillar vs. Western Midstream Partners | Caterpillar vs. Edgewise Therapeutics |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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