Correlation Between Thrivent Large and Caterpillar

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

Diversification Opportunities for Thrivent Large and Caterpillar

0.8
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between Thrivent Large and Caterpillar

Assuming the 90 days horizon Thrivent Large Cap is expected to generate 0.86 times more return on investment than Caterpillar. However, Thrivent Large Cap is 1.16 times less risky than Caterpillar. It trades about -0.28 of its potential returns per unit of risk. Caterpillar is currently generating about -0.38 per unit of risk. If you would invest  1,313  in Thrivent Large Cap on June 27, 2022 and sell it today you would lose (119.00)  from holding Thrivent Large Cap or give up 9.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

Thrivent Large Cap  vs.  Caterpillar

 Performance (%) 
       Timeline  
Thrivent Large Cap 
Thrivent Performance
0 of 100
Over the last 90 days Thrivent Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Thrivent Large is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Thrivent Price Channel

Caterpillar 
Caterpillar Performance
0 of 100
Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Caterpillar Price Channel

Thrivent Large and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Thrivent Large and Caterpillar

The main advantage of trading using opposite Thrivent Large and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thrivent Large 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.
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The idea behind Thrivent Large Cap 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.
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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 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.

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