Correlation Between Hilton Worldwide and Caterpillar

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Hilton Worldwide 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 Hilton Worldwide and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hilton Worldwide Holdings and Caterpillar, you can compare the effects of market volatilities on Hilton Worldwide 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 Hilton Worldwide with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Worldwide and Caterpillar.

Diversification Opportunities for Hilton Worldwide and Caterpillar

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Hilton and Caterpillar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Hilton Worldwide 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 Hilton Worldwide Holdings 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 Hilton Worldwide i.e., Hilton Worldwide and Caterpillar go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Caterpillar

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to generate 0.59 times more return on investment than Caterpillar. However, Hilton Worldwide Holdings is 1.7 times less risky than Caterpillar. It trades about 0.23 of its potential returns per unit of risk. Caterpillar is currently generating about 0.12 per unit of risk. If you would invest  21,600  in Hilton Worldwide Holdings on September 12, 2024 and sell it today you would earn a total of  3,772  from holding Hilton Worldwide Holdings or generate 17.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Hilton Worldwide Holdings  vs.  Caterpillar

 Performance 
       Timeline  
Hilton Worldwide Holdings 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Hilton Worldwide unveiled solid returns over the last few months and may actually be approaching a breakup point.
Caterpillar 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hilton Worldwide and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hilton Worldwide and Caterpillar

The main advantage of trading using opposite Hilton Worldwide and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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.
The idea behind Hilton Worldwide Holdings and Caterpillar 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.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

Other Complementary Tools

AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
USA ETFs
Find actively traded Exchange Traded Funds (ETF) in USA
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope