Correlation Between Caterpillar and Thrivent Partner

Can any of the company-specific risk be diversified away by investing in both Caterpillar and Thrivent Partner 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 Thrivent Partner into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and Thrivent Partner Worldwide, you can compare the effects of market volatilities on Caterpillar and Thrivent Partner 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 Thrivent Partner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Thrivent Partner.

Diversification Opportunities for Caterpillar and Thrivent Partner

0.82

Correlation Coefficient

Caterpillar  Thrivent Partner

Very poor diversification

The 3 months correlation between Caterpillar and Thrivent is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Thrivent Partner Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Partner Wor 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 Thrivent Partner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Partner Wor has no effect on the direction of Caterpillar i.e., Caterpillar and Thrivent Partner go up and down completely randomly.

Pair Corralation between Caterpillar and Thrivent Partner

Considering the 90-day investment horizon Caterpillar is expected to generate 2.41 times more return on investment than Thrivent Partner. However, Caterpillar is 2.41 times more volatile than Thrivent Partner Worldwide. It trades about 0.02 of its potential returns per unit of risk. Thrivent Partner Worldwide is currently generating about -0.39 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	100.0%
Values	Daily Returns

Caterpillar  vs.  Thrivent Partner Worldwide

Caterpillar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Thrivent Partner Wor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Partner Worldwide are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thrivent Partner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Thrivent Partner

The main advantage of trading using opposite Caterpillar and Thrivent Partner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Thrivent Partner 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 Thrivent Partner will offset losses from the drop in Thrivent Partner's long position.

The idea behind Caterpillar and Thrivent Partner Worldwide 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.