Correlation Between Rayonier Advanced and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Rayonier Advanced 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 Rayonier Advanced and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rayonier Advanced Materials and Caterpillar, you can compare the effects of market volatilities on Rayonier Advanced 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 Rayonier Advanced with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rayonier Advanced and Caterpillar.
Diversification Opportunities for Rayonier Advanced and Caterpillar
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rayonier and Caterpillar is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Rayonier Advanced 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 Rayonier Advanced Materials 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 Rayonier Advanced i.e., Rayonier Advanced and Caterpillar go up and down completely randomly.
Pair Corralation between Rayonier Advanced and Caterpillar
Assuming the 90 days horizon Rayonier Advanced Materials is expected to generate 2.28 times more return on investment than Caterpillar. However, Rayonier Advanced is 2.28 times more volatile than Caterpillar. It trades about 0.03 of its potential returns per unit of risk. Caterpillar is currently generating about 0.05 per unit of risk. If you would invest 615.00 in Rayonier Advanced Materials on October 7, 2024 and sell it today you would earn a total of 175.00 from holding Rayonier Advanced Materials or generate 28.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rayonier Advanced Materials vs. Caterpillar
Performance |
| Timeline |
| Rayonier Advanced |
| Caterpillar |
Rayonier Advanced and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rayonier Advanced and Caterpillar
The main advantage of trading using opposite Rayonier Advanced and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rayonier Advanced 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.| Rayonier Advanced vs. AIR LIQUIDE ADR | Rayonier Advanced vs. Shin Etsu Chemical Co | Rayonier Advanced vs. Superior Plus Corp | Rayonier Advanced vs. NMI Holdings |
| Caterpillar vs. JD SPORTS FASH | Caterpillar vs. EPSILON HEALTHCARE LTD | Caterpillar vs. Fukuyama Transporting Co | Caterpillar vs. Columbia Sportswear |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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