Correlation Between Caterpillar and Vanguard Total

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

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

Diversification Opportunities for Caterpillar and Vanguard Total

-0.36

Correlation Coefficient

Caterpillar  Vanguard Total

Very good diversification

The 3 months correlation between Caterpillar and Vanguard is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Caterpillar i.e., Caterpillar and Vanguard Total go up and down completely randomly.

Pair Corralation between Caterpillar and Vanguard Total

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Vanguard Total. In addition to that, Caterpillar is 1.65 times more volatile than Vanguard Total Stock. It trades about -0.57 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.22 per unit of volatility. If you would invest  26,257  in Vanguard Total Stock on March 21, 2024 and sell it today you would earn a total of  683.00  from holding Vanguard Total Stock or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Vanguard Total Stock

Caterpillar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Vanguard Total Stock

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Caterpillar and Vanguard Total

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

The idea behind Caterpillar and Vanguard Total Stock 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.