Correlation Between Caterpillar and BlackRock Global

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

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

Diversification Opportunities for Caterpillar and BlackRock Global

0.75

Correlation Coefficient

Caterpillar  BlackRock Global

Poor diversification

The 3 months correlation between Caterpillar and BlackRock is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and BlackRock Global Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Global Opp 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Global Opp has no effect on the direction of Caterpillar i.e., Caterpillar and BlackRock Global go up and down completely randomly.

Pair Corralation between Caterpillar and BlackRock Global

Considering the 90-day investment horizon Caterpillar is expected to under-perform the BlackRock Global. In addition to that, Caterpillar is 1.89 times more volatile than BlackRock Global Opportunities. It trades about -0.08 of its total potential returns per unit of risk. BlackRock Global Opportunities is currently generating about 0.02 per unit of volatility. If you would invest  1,130  in BlackRock Global Opportunities on September 12, 2024 and sell it today you would earn a total of  2.00  from holding BlackRock Global Opportunities or generate 0.18% return on investment over 90 days.

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

Caterpillar  vs.  BlackRock Global Opportunities

Caterpillar

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

BlackRock Global Opp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Global Opportunities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BlackRock Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caterpillar and BlackRock Global

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

The idea behind Caterpillar and BlackRock Global Opportunities 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.