Correlation Between Caterpillar and Amtech Systems

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

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

Diversification Opportunities for Caterpillar and Amtech Systems

0.34

Correlation Coefficient

Caterpillar  Amtech Systems

Weak diversification

The 3 months correlation between Caterpillar and Amtech is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Amtech Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amtech Systems 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 Amtech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amtech Systems has no effect on the direction of Caterpillar i.e., Caterpillar and Amtech Systems go up and down completely randomly.

Pair Corralation between Caterpillar and Amtech Systems

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Amtech Systems. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 2.05 times less risky than Amtech Systems. The stock trades about -0.08 of its potential returns per unit of risk. The Amtech Systems is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  552.00  in Amtech Systems on December 30, 2024 and sell it today you would lose (53.00) from holding Amtech Systems or give up 9.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Amtech Systems

Caterpillar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

Amtech Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amtech Systems 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.

Pair Trading with Caterpillar and Amtech Systems

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

The idea behind Caterpillar and Amtech Systems 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..