Correlation Between Caterpillar and CopAur Minerals

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

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

Diversification Opportunities for Caterpillar and CopAur Minerals

-0.35

Correlation Coefficient

Caterpillar  CopAur Minerals

Very good diversification

The 3 months correlation between Caterpillar and CopAur is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and CopAur Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CopAur Minerals 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 CopAur Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CopAur Minerals has no effect on the direction of Caterpillar i.e., Caterpillar and CopAur Minerals go up and down completely randomly.

Pair Corralation between Caterpillar and CopAur Minerals

Considering the 90-day investment horizon Caterpillar is expected to generate 0.23 times more return on investment than CopAur Minerals. However, Caterpillar is 4.33 times less risky than CopAur Minerals. It trades about 0.09 of its potential returns per unit of risk. CopAur Minerals is currently generating about -0.03 per unit of risk. If you would invest  34,671  in Caterpillar on September 14, 2024 and sell it today you would earn a total of  3,407  from holding Caterpillar or generate 9.83% return on investment over 90 days.

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

Caterpillar  vs.  CopAur Minerals

Caterpillar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Caterpillar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CopAur Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CopAur Minerals 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Caterpillar and CopAur Minerals

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

The idea behind Caterpillar and CopAur Minerals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..