Correlation Between Caterpillar and Aquagold International

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

By analyzing existing cross correlation between Caterpillar and Aquagold International, you can compare the effects of market volatilities on Caterpillar and Aquagold International 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 Aquagold International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Aquagold International.

Diversification Opportunities for Caterpillar and Aquagold International

0.0

Correlation Coefficient

Caterpillar  Aquagold International

Pay attention - limited upside

The 3 months correlation between Caterpillar and Aquagold is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Aquagold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquagold International 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 Aquagold International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquagold International has no effect on the direction of Caterpillar i.e., Caterpillar and Aquagold International go up and down completely randomly.

Pair Corralation between Caterpillar and Aquagold International

If you would invest  35,385  in Caterpillar on September 18, 2024 and sell it today you would earn a total of  2,507  from holding Caterpillar or generate 7.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Aquagold International

Caterpillar

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 5 (%) 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.

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Aquagold International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Caterpillar and Aquagold International

The main advantage of trading using opposite Caterpillar and Aquagold International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Aquagold International 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 Aquagold International will offset losses from the drop in Aquagold International's long position.

The idea behind Caterpillar and Aquagold International 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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.