Correlation Between Hino Motors and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Hino Motors 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 Hino Motors and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hino Motors Ltd and Caterpillar, you can compare the effects of market volatilities on Hino Motors 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 Hino Motors with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hino Motors and Caterpillar.
Diversification Opportunities for Hino Motors and Caterpillar
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hino and Caterpillar is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hino Motors Ltd and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Hino Motors 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 Hino Motors Ltd 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 Hino Motors i.e., Hino Motors and Caterpillar go up and down completely randomly.
Pair Corralation between Hino Motors and Caterpillar
Assuming the 90 days horizon Hino Motors Ltd is expected to under-perform the Caterpillar. In addition to that, Hino Motors is 2.48 times more volatile than Caterpillar. It trades about -0.22 of its total potential returns per unit of risk. Caterpillar is currently generating about -0.44 per unit of volatility. If you would invest 39,498 in Caterpillar on November 28, 2024 and sell it today you would lose (5,230) from holding Caterpillar or give up 13.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Hino Motors Ltd vs. Caterpillar
Performance |
| Timeline |
| Hino Motors |
| Caterpillar |
Hino Motors and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hino Motors and Caterpillar
The main advantage of trading using opposite Hino Motors and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hino Motors 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.| Hino Motors vs. Daimler Truck Holding | Hino Motors vs. Volvo AB ADR | Hino Motors vs. Columbus McKinnon | Hino Motors vs. Hyster Yale Materials Handling |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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