Correlation Between Caterpillar and Dreyfus Global

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

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

Diversification Opportunities for Caterpillar and Dreyfus Global

-0.02

Correlation Coefficient

Caterpillar  Dreyfus Global

Good diversification

The 3 months correlation between Caterpillar and Dreyfus is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Dreyfus Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Global Real 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 Dreyfus Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Global Real has no effect on the direction of Caterpillar i.e., Caterpillar and Dreyfus Global go up and down completely randomly.

Pair Corralation between Caterpillar and Dreyfus Global

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Dreyfus Global. In addition to that, Caterpillar is 3.45 times more volatile than Dreyfus Global Real. It trades about -0.08 of its total potential returns per unit of risk. Dreyfus Global Real is currently generating about 0.04 per unit of volatility. If you would invest  1,469  in Dreyfus Global Real on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Dreyfus Global Real or generate 1.02% return on investment over 90 days.

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

Caterpillar  vs.  Dreyfus Global Real

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Dreyfus Global Real

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Global Real are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Dreyfus Global 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 Dreyfus Global

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

The idea behind Caterpillar and Dreyfus Global Real 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.