Correlation Between Caterpillar and EURN Old

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

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

Diversification Opportunities for Caterpillar and EURN Old

-0.38

Correlation Coefficient

Caterpillar  EURN Old

Very good diversification

The 3 months correlation between Caterpillar and EURN is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and EURN Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EURN Old 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 EURN Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EURN Old has no effect on the direction of Caterpillar i.e., Caterpillar and EURN Old go up and down completely randomly.

Pair Corralation between Caterpillar and EURN Old

If you would invest  1,631  in EURN Old on October 10, 2024 and sell it today you would earn a total of  0.00  from holding EURN Old or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Caterpillar  vs.  EURN Old

Caterpillar

Risk-Adjusted Performance

0 of 100

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.

EURN Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EURN Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, EURN Old is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and EURN Old

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

The idea behind Caterpillar and EURN Old 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.