Correlation Between Deutsche Real and Caterpillar
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
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Deutsche and Caterpillar is 0.81. 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 under-perform the Caterpillar. But the mutual fund apears to be less risky and, when comparing its historical volatility, Deutsche Real Assets is 1.92 times less risky than Caterpillar. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Caterpillar is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 35,510 in Caterpillar on January 26, 2024 and sell it today you would earn a total of 842.00 from holding Caterpillar or generate 2.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Deutsche Real Assets vs. Caterpillar
Performance |
Timeline |
Deutsche Real Assets |
Caterpillar |
Deutsche Real and Caterpillar Volatility Contrast
Predicted Return Density |
Returns |
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.Deutsche Real vs. Deutsche Gnma Fund | Deutsche Real vs. Deutsche Short Term Municipal | Deutsche Real vs. Deutsche Short Term Municipal | Deutsche Real vs. Deutsche Science And |
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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 the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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