Correlation Between Buhler Industries and Caterpillar

Can any of the company-specific risk be diversified away by investing in both Buhler Industries 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 Buhler Industries and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Buhler Industries and Caterpillar, you can compare the effects of market volatilities on Buhler Industries 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 Buhler Industries with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buhler Industries and Caterpillar.

Diversification Opportunities for Buhler Industries and Caterpillar

0.0

Correlation Coefficient

Buhler Industries  Caterpillar

Pay attention - limited upside

The 3 months correlation between Buhler and Caterpillar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Buhler Industries and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Buhler Industries 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 Buhler Industries 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 Buhler Industries i.e., Buhler Industries and Caterpillar go up and down completely randomly.

Pair Corralation between Buhler Industries and Caterpillar

If you would invest  34,671  in Caterpillar on September 14, 2024 and sell it today you would earn a total of  3,407  from holding Caterpillar or generate 9.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Buhler Industries  vs.  Caterpillar

Buhler Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buhler Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Buhler Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Caterpillar

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Caterpillar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Buhler Industries and Caterpillar

The main advantage of trading using opposite Buhler Industries and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buhler Industries 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 Buhler Industries 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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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.