Correlation Between Caterpillar and BBX Capital

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

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

Diversification Opportunities for Caterpillar and BBX Capital

-0.03

Correlation Coefficient

Caterpillar  BBX Capital

Good diversification

The 3 months correlation between Caterpillar and BBX is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and BBX Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBX Capital 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 BBX Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBX Capital has no effect on the direction of Caterpillar i.e., Caterpillar and BBX Capital go up and down completely randomly.

Pair Corralation between Caterpillar and BBX Capital

Considering the 90-day investment horizon Caterpillar is expected to generate 0.98 times more return on investment than BBX Capital. However, Caterpillar is 1.02 times less risky than BBX Capital. It trades about -0.08 of its potential returns per unit of risk. BBX Capital is currently generating about -0.11 per unit of risk. If you would invest  36,168  in Caterpillar on December 29, 2024 and sell it today you would lose (3,199) from holding Caterpillar or give up 8.84% of portfolio value over 90 days.

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

Caterpillar  vs.  BBX Capital

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.

BBX Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBX Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Caterpillar and BBX Capital

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

The idea behind Caterpillar and BBX Capital 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.