Correlation Between Tianjin Capital and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Tianjin Capital 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 Tianjin Capital and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tianjin Capital Environmental and Caterpillar, you can compare the effects of market volatilities on Tianjin Capital 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 Tianjin Capital with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Capital and Caterpillar.
Diversification Opportunities for Tianjin Capital and Caterpillar
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tianjin and Caterpillar is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Tianjin Capital 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 Tianjin Capital Environmental 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 Tianjin Capital i.e., Tianjin Capital and Caterpillar go up and down completely randomly.
Pair Corralation between Tianjin Capital and Caterpillar
Assuming the 90 days horizon Tianjin Capital is expected to generate 1.89 times less return on investment than Caterpillar. In addition to that, Tianjin Capital is 1.34 times more volatile than Caterpillar. It trades about 0.03 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.07 per unit of volatility. If you would invest 30,101 in Caterpillar on October 7, 2024 and sell it today you would earn a total of 4,999 from holding Caterpillar or generate 16.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tianjin Capital Environmental vs. Caterpillar
Performance |
| Timeline |
| Tianjin Capital Envi |
| Caterpillar |
Tianjin Capital and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tianjin Capital and Caterpillar
The main advantage of trading using opposite Tianjin Capital and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tianjin Capital 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.| Tianjin Capital vs. Veolia Environnement SA | Tianjin Capital vs. Veolia Environnement SA | Tianjin Capital vs. Superior Plus Corp | Tianjin Capital 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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