Correlation Between Caterpillar and Dalrada Financial

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

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

Diversification Opportunities for Caterpillar and Dalrada Financial

0.32

Correlation Coefficient

Caterpillar  Dalrada Financial

Weak diversification

The 3 months correlation between Caterpillar and Dalrada is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Dalrada Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalrada Financial Corp 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 Dalrada Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalrada Financial Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Dalrada Financial go up and down completely randomly.

Pair Corralation between Caterpillar and Dalrada Financial

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Dalrada Financial. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 70.33 times less risky than Dalrada Financial. The stock trades about -0.06 of its potential returns per unit of risk. The Dalrada Financial Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5.90  in Dalrada Financial Corp on December 27, 2024 and sell it today you would lose (4.80) from holding Dalrada Financial Corp or give up 81.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Caterpillar  vs.  Dalrada Financial Corp

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.

Dalrada Financial Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dalrada Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Dalrada Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Dalrada Financial

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

The idea behind Caterpillar and Dalrada Financial Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .