Correlation Between Caterpillar and Penumbra
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Penumbra 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 Penumbra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Penumbra, you can compare the effects of market volatilities on Caterpillar and Penumbra 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 Penumbra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Penumbra.
Diversification Opportunities for Caterpillar and Penumbra
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Penumbra is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Penumbra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penumbra 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 Penumbra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penumbra has no effect on the direction of Caterpillar i.e., Caterpillar and Penumbra go up and down completely randomly.
Pair Corralation between Caterpillar and Penumbra
Considering the 90-day investment horizon Caterpillar is expected to generate 0.77 times more return on investment than Penumbra. However, Caterpillar is 1.31 times less risky than Penumbra. It trades about 0.2 of its potential returns per unit of risk. Penumbra is currently generating about 0.07 per unit of risk. If you would invest 41,669 in Caterpillar on August 21, 2025 and sell it today you would earn a total of 13,019 from holding Caterpillar or generate 31.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Penumbra
Performance |
| Timeline |
| Caterpillar |
| Penumbra |
Caterpillar and Penumbra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Penumbra
The main advantage of trading using opposite Caterpillar and Penumbra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Penumbra 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 Penumbra will offset losses from the drop in Penumbra's long position.| Caterpillar vs. Raytheon Technologies Corp | Caterpillar vs. Deere Company | Caterpillar vs. GE Aerospace | Caterpillar vs. Eaton PLC |
| Penumbra vs. Globus Medical | Penumbra vs. Bio Rad Laboratories | Penumbra vs. Align Technology | Penumbra vs. HealthEquity |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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