Correlation Between Caterpillar and Crane Holdings

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

Diversification Opportunities for Caterpillar and Crane Holdings

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Caterpillar and Crane is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Crane Holdings CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Holdings CO 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 Crane Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane Holdings CO has no effect on the direction of Caterpillar i.e., Caterpillar and Crane Holdings go up and down completely randomly.

Pair Corralation between Caterpillar and Crane Holdings

Considering the 90-day investment horizon Caterpillar is expected to generate 3.37 times less return on investment than Crane Holdings. In addition to that, Caterpillar is 1.19 times more volatile than Crane Holdings CO. It trades about 0.01 of its total potential returns per unit of risk. Crane Holdings CO is currently generating about 0.05 per unit of volatility. If you would invest  9,020  in Crane Holdings CO on July 7, 2022 and sell it today you would earn a total of  472.00  from holding Crane Holdings CO or generate 5.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Crane Holdings CO

 Performance (%) 
       Timeline  
Caterpillar 
Caterpillar Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Caterpillar Price Channel

Crane Holdings CO 
Crane Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Crane Holdings CO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Crane Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Crane Price Channel

Caterpillar and Crane Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Crane Holdings

The main advantage of trading using opposite Caterpillar and Crane Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Crane Holdings 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 Crane Holdings will offset losses from the drop in Crane Holdings' long position.
Caterpillar vs. Amazon Inc
The idea behind Caterpillar and Crane Holdings CO 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.
Crane Holdings vs. Amazon Inc
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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