Correlation Between DEUTSCHE REAL and Caterpillar

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Can any of the company-specific risk be diversified away by investing in both DEUTSCHE REAL and Caterpillar 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 DEUTSCHE REAL and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DEUTSCHE REAL ASSETS and Caterpillar, you can compare the effects of market volatilities on DEUTSCHE REAL and Caterpillar 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 DEUTSCHE REAL with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of DEUTSCHE REAL and Caterpillar.

Diversification Opportunities for DEUTSCHE REAL and Caterpillar

  Correlation Coefficient

Poor diversification

The 3 months correlation between DEUTSCHE and Caterpillar is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DEUTSCHE REAL ASSETS and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and DEUTSCHE REAL 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 DEUTSCHE REAL ASSETS are associated (or correlated) with Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of DEUTSCHE REAL i.e., DEUTSCHE REAL and Caterpillar go up and down completely randomly.

Pair Corralation between DEUTSCHE REAL and Caterpillar

Assuming the 90 days horizon DEUTSCHE REAL ASSETS is expected to generate 0.44 times more return on investment than Caterpillar. However, DEUTSCHE REAL ASSETS is 2.29 times less risky than Caterpillar. It trades about -0.07 of its potential returns per unit of risk. Caterpillar is currently generating about -0.04 per unit of risk. If you would invest  1,122  in DEUTSCHE REAL ASSETS on December 22, 2022 and sell it today you would lose (39.00)  from holding DEUTSCHE REAL ASSETS or give up 3.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

DEUTSCHE REAL ASSETS  vs.  Caterpillar

 Performance (%) 

DEUTSCHE Performance

0 of 100

Over the last 90 days DEUTSCHE REAL ASSETS has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, DEUTSCHE REAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Caterpillar Performance

0 of 100

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

DEUTSCHE REAL and Caterpillar Volatility Contrast

   Predicted Return Density   

Pair Trading with DEUTSCHE REAL and Caterpillar

The main advantage of trading using opposite DEUTSCHE REAL and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DEUTSCHE REAL position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.
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The idea behind DEUTSCHE REAL ASSETS and Caterpillar pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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