Correlation Between Caterpillar and Blackrock Taxable

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

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

Diversification Opportunities for Caterpillar and Blackrock Taxable

-0.59

Correlation Coefficient

Caterpillar  Blackrock Taxable

Excellent diversification

The 3 months correlation between Caterpillar and Blackrock is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Blackrock Taxable Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Taxable 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 Blackrock Taxable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Taxable has no effect on the direction of Caterpillar i.e., Caterpillar and Blackrock Taxable go up and down completely randomly.

Pair Corralation between Caterpillar and Blackrock Taxable

Considering the 90-day investment horizon Caterpillar is expected to generate 2.3 times more return on investment than Blackrock Taxable. However, Caterpillar is 2.3 times more volatile than Blackrock Taxable Municipal. It trades about 0.16 of its potential returns per unit of risk. Blackrock Taxable Municipal is currently generating about -0.03 per unit of risk. If you would invest  33,554  in Caterpillar on September 4, 2024 and sell it today you would earn a total of  6,697  from holding Caterpillar or generate 19.96% return on investment over 90 days.

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

Caterpillar  vs.  Blackrock Taxable Municipal

Caterpillar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blackrock Taxable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Taxable Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy fundamental drivers, Blackrock Taxable is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Blackrock Taxable

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

The idea behind Caterpillar and Blackrock Taxable Municipal 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.