Correlation Between Caterpillar and Goodness Growth
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Goodness Growth 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 Caterpillar and Goodness Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Goodness Growth Holdings, you can compare the effects of market volatilities on Caterpillar and Goodness Growth 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 Caterpillar with a short position of Goodness Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Goodness Growth.
Diversification Opportunities for Caterpillar and Goodness Growth
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Goodness is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Goodness Growth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodness Growth Holdings and Caterpillar 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 Caterpillar are associated (or correlated) with Goodness Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodness Growth Holdings has no effect on the direction of Caterpillar i.e., Caterpillar and Goodness Growth go up and down completely randomly.
Pair Corralation between Caterpillar and Goodness Growth
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Goodness Growth. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 9.2 times less risky than Goodness Growth. The stock trades about -0.15 of its potential returns per unit of risk. The Goodness Growth Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 35.00 in Goodness Growth Holdings on December 4, 2024 and sell it today you would earn a total of 7.00 from holding Goodness Growth Holdings or generate 20.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Caterpillar vs. Goodness Growth Holdings
Performance |
Timeline |
Caterpillar |
Goodness Growth Holdings |
Caterpillar and Goodness Growth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Caterpillar and Goodness Growth
The main advantage of trading using opposite Caterpillar and Goodness Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Goodness Growth 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 Goodness Growth will offset losses from the drop in Goodness Growth's long position.Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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