Correlation Between Cohn Steers and Caterpillar

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

Diversification Opportunities for Cohn Steers and Caterpillar

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cohn Steers and Caterpillar is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cohn Steers and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Cohn Steers 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 Cohn Steers 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 Cohn Steers i.e., Cohn Steers and Caterpillar go up and down completely randomly.

Pair Corralation between Cohn Steers and Caterpillar

Considering the 90-day investment horizon Cohn Steers is expected to generate 0.48 times more return on investment than Caterpillar. However, Cohn Steers is 2.08 times less risky than Caterpillar. It trades about 0.61 of its potential returns per unit of risk. Caterpillar is currently generating about 0.15 per unit of risk. If you would invest  6,540  in Cohn Steers on May 11, 2022 and sell it today you would earn a total of  1,040  from holding Cohn Steers or generate 15.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Cohn Steers  vs.  Caterpillar

 Performance (%) 
       Timeline  
Cohn Steers 
Cohn Steers Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cohn Steers are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cohn Steers may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Cohn Steers 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 weak 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

Cohn Steers and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cohn Steers and Caterpillar

The main advantage of trading using opposite Cohn Steers and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cohn Steers 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 Cohn Steers 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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