Correlation Between Caterpillar and ARRWW Old

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

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

Diversification Opportunities for Caterpillar and ARRWW Old

0.0

Correlation Coefficient

Caterpillar  ARRWW Old

Pay attention - limited upside

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

Pair Corralation between Caterpillar and ARRWW Old

If you would invest  36,406  in Caterpillar on October 24, 2024 and sell it today you would earn a total of  3,355  from holding Caterpillar or generate 9.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Caterpillar  vs.  ARRWW Old

Caterpillar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 2 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

ARRWW Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARRWW Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ARRWW Old is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Caterpillar and ARRWW Old

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

The idea behind Caterpillar and ARRWW Old 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .