Correlation Between Caterpillar and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both Caterpillar and WisdomTree Japan 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 WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and WisdomTree Japan SmallCap, you can compare the effects of market volatilities on Caterpillar and WisdomTree Japan 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 WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and WisdomTree Japan.
Diversification Opportunities for Caterpillar and WisdomTree Japan
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and WisdomTree is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and WisdomTree Japan SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan SmallCap 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 WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan SmallCap has no effect on the direction of Caterpillar i.e., Caterpillar and WisdomTree Japan go up and down completely randomly.
Pair Corralation between Caterpillar and WisdomTree Japan
Considering the 90-day investment horizon Caterpillar is expected to generate 1.66 times more return on investment than WisdomTree Japan. However, Caterpillar is 1.66 times more volatile than WisdomTree Japan SmallCap. It trades about 0.27 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.24 per unit of risk. If you would invest 35,051 in Caterpillar on May 29, 2025 and sell it today you would earn a total of 8,179 from holding Caterpillar or generate 23.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Caterpillar vs. WisdomTree Japan SmallCap
Performance |
| Timeline |
| Caterpillar |
| WisdomTree Japan SmallCap |
Caterpillar and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and WisdomTree Japan
The main advantage of trading using opposite Caterpillar and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, WisdomTree Japan 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 WisdomTree Japan will offset losses from the drop in WisdomTree Japan's long position.| Caterpillar vs. Deere Company | Caterpillar vs. GreenPower Motor | Caterpillar vs. Hyster Yale Materials Handling | Caterpillar vs. Alamo Group |
| WisdomTree Japan vs. WisdomTree Global ex US | WisdomTree Japan vs. WisdomTree Europe SmallCap | WisdomTree Japan vs. WisdomTree International MidCap | WisdomTree Japan vs. WisdomTree Global High |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |