Correlation Between Caterpillar and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Innovator Equity 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 Innovator Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Innovator Equity Accelerated, you can compare the effects of market volatilities on Caterpillar and Innovator Equity 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 Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Innovator Equity.
Diversification Opportunities for Caterpillar and Innovator Equity
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Innovator is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Innovator Equity Accelerated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Acc 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Acc has no effect on the direction of Caterpillar i.e., Caterpillar and Innovator Equity go up and down completely randomly.
Pair Corralation between Caterpillar and Innovator Equity
Considering the 90-day investment horizon Caterpillar is expected to generate 4.16 times more return on investment than Innovator Equity. However, Caterpillar is 4.16 times more volatile than Innovator Equity Accelerated. It trades about 0.21 of its potential returns per unit of risk. Innovator Equity Accelerated is currently generating about 0.24 per unit of risk. If you would invest 34,769 in Caterpillar on June 5, 2025 and sell it today you would earn a total of 6,743 from holding Caterpillar or generate 19.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Innovator Equity Accelerated
Performance |
| Timeline |
| Caterpillar |
| Innovator Equity Acc |
Caterpillar and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Innovator Equity
The main advantage of trading using opposite Caterpillar and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Innovator Equity 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 Innovator Equity will offset losses from the drop in Innovator Equity's long position.| Caterpillar vs. Deere Company | Caterpillar vs. AGCO Corporation | Caterpillar vs. PACCAR Inc | Caterpillar vs. CNH Industrial NV |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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