Correlation Between Caterpillar and Six Circles

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

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

Diversification Opportunities for Caterpillar and Six Circles

-0.64

Correlation Coefficient

Caterpillar  Six Circles

Excellent diversification

The 3 months correlation between Caterpillar and Six is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Six Circles Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles Tax 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 Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles Tax has no effect on the direction of Caterpillar i.e., Caterpillar and Six Circles go up and down completely randomly.

Pair Corralation between Caterpillar and Six Circles

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Six Circles. In addition to that, Caterpillar is 38.35 times more volatile than Six Circles Tax. It trades about -0.05 of its total potential returns per unit of risk. Six Circles Tax is currently generating about 0.22 per unit of volatility. If you would invest  984.00  in Six Circles Tax on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Six Circles Tax or generate 0.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Caterpillar  vs.  Six Circles Tax

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 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.

Six Circles Tax

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Six Circles Tax are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Six Circles is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Six Circles

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

The idea behind Caterpillar and Six Circles Tax 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.