Correlation Between Caterpillar and Canada Rare
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Canada Rare 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 Canada Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Canada Rare Earth, you can compare the effects of market volatilities on Caterpillar and Canada Rare 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 Canada Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Canada Rare.
Diversification Opportunities for Caterpillar and Canada Rare
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Caterpillar and Canada is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Canada Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Rare Earth 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 Canada Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Rare Earth has no effect on the direction of Caterpillar i.e., Caterpillar and Canada Rare go up and down completely randomly.
Pair Corralation between Caterpillar and Canada Rare
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Canada Rare. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 12.38 times less risky than Canada Rare. The stock trades about -0.17 of its potential returns per unit of risk. The Canada Rare Earth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.00 in Canada Rare Earth on December 1, 2024 and sell it today you would earn a total of 0.00 from holding Canada Rare Earth or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Caterpillar vs. Canada Rare Earth
Performance |
Timeline |
Caterpillar |
Canada Rare Earth |
Caterpillar and Canada Rare Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Caterpillar and Canada Rare
The main advantage of trading using opposite Caterpillar and Canada Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Canada Rare 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 Canada Rare will offset losses from the drop in Canada Rare's long position.Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
Canada Rare vs. Commerce Resources Corp | Canada Rare vs. Medallion Resources | Canada Rare vs. Ucore Rare Metals | Canada Rare vs. Bravada Gold |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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