Correlation Between Disney and Caterpillar

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

Diversification Opportunities for Disney and Caterpillar

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Disney and Caterpillar is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Disney 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 Walt Disney 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 Disney i.e., Disney and Caterpillar go up and down completely randomly.

Pair Corralation between Disney and Caterpillar

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Caterpillar. In addition to that, Disney is 1.05 times more volatile than Caterpillar. It trades about -0.04 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.04 per unit of volatility. If you would invest  17,040  in Caterpillar on September 5, 2022 and sell it today you would earn a total of  6,573  from holding Caterpillar or generate 38.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Caterpillar

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
0 of 100
Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Disney Price Channel

Caterpillar 
Caterpillar Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Caterpillar Price Channel

Disney and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Caterpillar

The main advantage of trading using opposite Disney and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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.
Disney vs. Altice USA
Disney vs. Clear Channel Outdoor
Disney vs. Beasley Broadcast Group
Disney vs. Audacy Inc
The idea behind Walt Disney 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.
Caterpillar vs. Columbus McKinnon
Caterpillar vs. CNH Industrial NV
Caterpillar vs. Gencor Industries
Caterpillar vs. Lindsay
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

Other Complementary Tools

Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
CEO Directory
Screen CEOs from public companies around the world
Go