Correlation Between Caterpillar and WH Group
Can any of the company-specific risk be diversified away by investing in both Caterpillar and WH Group 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 WH Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and WH Group Limited, you can compare the effects of market volatilities on Caterpillar and WH Group 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 WH Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and WH Group.
Diversification Opportunities for Caterpillar and WH Group
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and WHGRF is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and WH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WH Group Limited 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 WH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WH Group Limited has no effect on the direction of Caterpillar i.e., Caterpillar and WH Group go up and down completely randomly.
Pair Corralation between Caterpillar and WH Group
Considering the 90-day investment horizon Caterpillar is expected to generate 1.96 times more return on investment than WH Group. However, Caterpillar is 1.96 times more volatile than WH Group Limited. It trades about 0.16 of its potential returns per unit of risk. WH Group Limited is currently generating about 0.11 per unit of risk. If you would invest 33,380 in Caterpillar on September 11, 2024 and sell it today you would earn a total of 6,546 from holding Caterpillar or generate 19.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
Caterpillar vs. WH Group Limited
Performance |
Timeline |
Caterpillar |
WH Group Limited |
Caterpillar and WH Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Caterpillar and WH Group
The main advantage of trading using opposite Caterpillar and WH Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, WH Group 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 WH Group will offset losses from the drop in WH Group'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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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