Correlation Between Titan International and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Titan International 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 Titan International and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Titan International and Caterpillar, you can compare the effects of market volatilities on Titan International 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 Titan International with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan International and Caterpillar.
Diversification Opportunities for Titan International and Caterpillar
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Titan and Caterpillar is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Titan International and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Titan International 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 Titan International 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 Titan International i.e., Titan International and Caterpillar go up and down completely randomly.
Pair Corralation between Titan International and Caterpillar
Considering the 90-day investment horizon Titan International is expected to under-perform the Caterpillar. In addition to that, Titan International is 1.81 times more volatile than Caterpillar. It trades about -0.02 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.07 per unit of volatility. If you would invest 34,383 in Caterpillar on August 24, 2024 and sell it today you would earn a total of 4,576 from holding Caterpillar or generate 13.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Titan International vs. Caterpillar
Performance |
| Timeline |
| Titan International |
| Caterpillar |
Titan International and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Titan International and Caterpillar
The main advantage of trading using opposite Titan International and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan International 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.| Titan International vs. Shyft Group | Titan International vs. Manitowoc | Titan International vs. Oshkosh | Titan International vs. Terex |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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