Correlation Between Caterpillar and Copper Fox

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

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

Diversification Opportunities for Caterpillar and Copper Fox

-0.49

Correlation Coefficient

Caterpillar  Copper Fox

Very good diversification

The 3 months correlation between Caterpillar and Copper is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Copper Fox Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper Fox Metals 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 Copper Fox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper Fox Metals has no effect on the direction of Caterpillar i.e., Caterpillar and Copper Fox go up and down completely randomly.

Pair Corralation between Caterpillar and Copper Fox

Considering the 90-day investment horizon Caterpillar is expected to generate 0.32 times more return on investment than Copper Fox. However, Caterpillar is 3.08 times less risky than Copper Fox. It trades about 0.03 of its potential returns per unit of risk. Copper Fox Metals is currently generating about -0.02 per unit of risk. If you would invest  36,750  in Caterpillar on September 20, 2024 and sell it today you would earn a total of  830.00  from holding Caterpillar or generate 2.26% 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.  Copper Fox Metals

Caterpillar

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Copper Fox Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copper Fox Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Copper Fox is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caterpillar and Copper Fox

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

The idea behind Caterpillar and Copper Fox Metals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.