Correlation Between Caterpillar and Kubota
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Kubota 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 Kubota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Kubota, you can compare the effects of market volatilities on Caterpillar and Kubota 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 Kubota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Kubota.
Diversification Opportunities for Caterpillar and Kubota
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Kubota is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Caterpillar i.e., Caterpillar and Kubota go up and down completely randomly.
Pair Corralation between Caterpillar and Kubota
Considering the 90-day investment horizon Caterpillar is expected to generate 0.94 times more return on investment than Kubota. However, Caterpillar is 1.07 times less risky than Kubota. It trades about -0.05 of its potential returns per unit of risk. Kubota is currently generating about -0.16 per unit of risk. If you would invest 38,446 in Caterpillar on September 18, 2024 and sell it today you would lose (554.00) from holding Caterpillar or give up 1.44% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Caterpillar vs. Kubota
Performance |
Timeline |
Caterpillar |
Kubota |
Caterpillar and Kubota Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Caterpillar and Kubota
The main advantage of trading using opposite Caterpillar and Kubota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Kubota 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 Kubota will offset losses from the drop in Kubota's long position.Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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