Correlation Between Caterpillar and Saint Jean
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Saint Jean 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 Saint Jean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Saint Jean Carbon, you can compare the effects of market volatilities on Caterpillar and Saint Jean 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 Saint Jean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Saint Jean.
Diversification Opportunities for Caterpillar and Saint Jean
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Caterpillar and Saint is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Saint Jean Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saint Jean Carbon 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 Saint Jean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saint Jean Carbon has no effect on the direction of Caterpillar i.e., Caterpillar and Saint Jean go up and down completely randomly.
Pair Corralation between Caterpillar and Saint Jean
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Saint Jean. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 12.65 times less risky than Saint Jean. The stock trades about -0.08 of its potential returns per unit of risk. The Saint Jean Carbon is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2.40 in Saint Jean Carbon on December 30, 2024 and sell it today you would lose (1.09) from holding Saint Jean Carbon or give up 45.42% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.41% |
Values | Daily Returns |
Caterpillar vs. Saint Jean Carbon
Performance |
Timeline |
Caterpillar |
Saint Jean Carbon |
Caterpillar and Saint Jean Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Caterpillar and Saint Jean
The main advantage of trading using opposite Caterpillar and Saint Jean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Saint Jean 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 Saint Jean will offset losses from the drop in Saint Jean'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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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