Correlation Between Caterpillar and Rationalrgn Hedged
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Rationalrgn Hedged 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 Rationalrgn Hedged into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Rationalrgn Hedged Equity, you can compare the effects of market volatilities on Caterpillar and Rationalrgn Hedged 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 Rationalrgn Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Rationalrgn Hedged.
Diversification Opportunities for Caterpillar and Rationalrgn Hedged
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Caterpillar and Rationalrgn is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Rationalrgn Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rationalrgn Hedged Equity 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 Rationalrgn Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rationalrgn Hedged Equity has no effect on the direction of Caterpillar i.e., Caterpillar and Rationalrgn Hedged go up and down completely randomly.
Pair Corralation between Caterpillar and Rationalrgn Hedged
Considering the 90-day investment horizon Caterpillar is expected to generate 1.59 times more return on investment than Rationalrgn Hedged. However, Caterpillar is 1.59 times more volatile than Rationalrgn Hedged Equity. It trades about 0.41 of its potential returns per unit of risk. Rationalrgn Hedged Equity is currently generating about 0.23 per unit of risk. If you would invest 29,469 in Caterpillar on April 23, 2025 and sell it today you would earn a total of 11,538 from holding Caterpillar or generate 39.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Rationalrgn Hedged Equity
Performance |
| Timeline |
| Caterpillar |
| Rationalrgn Hedged Equity |
Caterpillar and Rationalrgn Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Rationalrgn Hedged
The main advantage of trading using opposite Caterpillar and Rationalrgn Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Rationalrgn Hedged 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 Rationalrgn Hedged will offset losses from the drop in Rationalrgn Hedged's long position.| Caterpillar vs. Deere Company | Caterpillar vs. AGCO Corporation | Caterpillar vs. PACCAR Inc | Caterpillar vs. CNH Industrial NV |
| Rationalrgn Hedged vs. Pax High Yield | Rationalrgn Hedged vs. Msift High Yield | Rationalrgn Hedged vs. Strategic Advisers Income | Rationalrgn Hedged vs. Barings High Yield |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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