Correlation Between Caterpillar and Invesco Dynamic

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

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

Diversification Opportunities for Caterpillar and Invesco Dynamic

0.76

Correlation Coefficient

Caterpillar  Invesco Dynamic

Poor diversification

The 3 months correlation between Caterpillar and Invesco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Invesco Dynamic Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Leisure 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 Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Leisure has no effect on the direction of Caterpillar i.e., Caterpillar and Invesco Dynamic go up and down completely randomly.

Pair Corralation between Caterpillar and Invesco Dynamic

Considering the 90-day investment horizon Caterpillar is expected to generate 1.04 times less return on investment than Invesco Dynamic. In addition to that, Caterpillar is 2.01 times more volatile than Invesco Dynamic Leisure. It trades about 0.15 of its total potential returns per unit of risk. Invesco Dynamic Leisure is currently generating about 0.32 per unit of volatility. If you would invest  4,509  in Invesco Dynamic Leisure on September 3, 2024 and sell it today you would earn a total of  923.00  from holding Invesco Dynamic Leisure or generate 20.47% return on investment over 90 days.

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

Caterpillar  vs.  Invesco Dynamic Leisure

Caterpillar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco Dynamic Leisure

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Invesco Dynamic revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Invesco Dynamic

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

The idea behind Caterpillar and Invesco Dynamic Leisure 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.