Correlation Between Caterpillar and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Vanguard Growth 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 Vanguard Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Vanguard Growth Index, you can compare the effects of market volatilities on Caterpillar and Vanguard Growth 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 Vanguard Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Vanguard Growth.
Diversification Opportunities for Caterpillar and Vanguard Growth
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Caterpillar i.e., Caterpillar and Vanguard Growth go up and down completely randomly.
Pair Corralation between Caterpillar and Vanguard Growth
Considering the 90-day investment horizon Caterpillar is expected to generate 1.78 times more return on investment than Vanguard Growth. However, Caterpillar is 1.78 times more volatile than Vanguard Growth Index. It trades about 0.02 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about -0.27 per unit of risk. If you would invest 35,645 in Caterpillar on January 20, 2024 and sell it today you would earn a total of 148.00 from holding Caterpillar or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caterpillar vs. Vanguard Growth Index
Performance |
| Timeline |
| Caterpillar |
| Vanguard Growth Index |
Caterpillar and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Vanguard Growth
The main advantage of trading using opposite Caterpillar and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Vanguard Growth 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 Vanguard Growth will offset losses from the drop in Vanguard Growth's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. CNH Industrial NV | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay |
| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Information Technology | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard Dividend Appreciation |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |