Correlation Between Caterpillar and IREIT MarketVector

Can any of the company-specific risk be diversified away by investing in both Caterpillar and IREIT MarketVector 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 IREIT MarketVector into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and iREIT MarketVector, you can compare the effects of market volatilities on Caterpillar and IREIT MarketVector 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 IREIT MarketVector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and IREIT MarketVector.

Diversification Opportunities for Caterpillar and IREIT MarketVector

0.82

Correlation Coefficient

Caterpillar  IREIT MarketVector

Very poor diversification

The 3 months correlation between Caterpillar and IREIT is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and iREIT MarketVector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iREIT MarketVector 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 IREIT MarketVector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iREIT MarketVector has no effect on the direction of Caterpillar i.e., Caterpillar and IREIT MarketVector go up and down completely randomly.

Pair Corralation between Caterpillar and IREIT MarketVector

Considering the 90-day investment horizon Caterpillar is expected to generate 1.39 times more return on investment than IREIT MarketVector. However, Caterpillar is 1.39 times more volatile than iREIT MarketVector. It trades about 0.22 of its potential returns per unit of risk. iREIT MarketVector is currently generating about 0.01 per unit of risk. If you would invest  36,539  in Caterpillar on October 22, 2024 and sell it today you would earn a total of  2,063  from holding Caterpillar or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  iREIT MarketVector

Caterpillar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

iREIT MarketVector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iREIT MarketVector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Caterpillar and IREIT MarketVector

The main advantage of trading using opposite Caterpillar and IREIT MarketVector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, IREIT MarketVector 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 IREIT MarketVector will offset losses from the drop in IREIT MarketVector's long position.

The idea behind Caterpillar and iREIT MarketVector pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.