Correlation Between Caterpillar and ZALANDO SE
Can any of the company-specific risk be diversified away by investing in both Caterpillar and ZALANDO SE 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 ZALANDO SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and ZALANDO SE ADR, you can compare the effects of market volatilities on Caterpillar and ZALANDO SE 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 ZALANDO SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and ZALANDO SE.
Diversification Opportunities for Caterpillar and ZALANDO SE
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and ZALANDO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ZALANDO SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZALANDO SE ADR 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 ZALANDO SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZALANDO SE ADR has no effect on the direction of Caterpillar i.e., Caterpillar and ZALANDO SE go up and down completely randomly.
Pair Corralation between Caterpillar and ZALANDO SE
Considering the 90-day investment horizon Caterpillar is expected to generate 3.15 times less return on investment than ZALANDO SE. But when comparing it to its historical volatility, Caterpillar is 1.29 times less risky than ZALANDO SE. It trades about 0.09 of its potential returns per unit of risk. ZALANDO SE ADR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,514 in ZALANDO SE ADR on September 6, 2024 and sell it today you would earn a total of 223.00 from holding ZALANDO SE ADR or generate 14.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Caterpillar vs. ZALANDO SE ADR
Performance |
Timeline |
Caterpillar |
ZALANDO SE ADR |
Caterpillar and ZALANDO SE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Caterpillar and ZALANDO SE
The main advantage of trading using opposite Caterpillar and ZALANDO SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, ZALANDO SE 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 ZALANDO SE will offset losses from the drop in ZALANDO SE's long position.Caterpillar vs. AGCO Corporation | Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Lion Electric Corp |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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