Correlation Between Caterpillar and FANH Old

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

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

Diversification Opportunities for Caterpillar and FANH Old

-0.43

Correlation Coefficient

Caterpillar  FANH Old

Very good diversification

The 3 months correlation between Caterpillar and FANH is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and FANH Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FANH 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 FANH Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FANH Old has no effect on the direction of Caterpillar i.e., Caterpillar and FANH Old go up and down completely randomly.

Pair Corralation between Caterpillar and FANH Old

If you would invest  151.00  in FANH Old on October 10, 2024 and sell it today you would earn a total of  0.00  from holding FANH Old or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Caterpillar  vs.  FANH 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.

FANH Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FANH Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Caterpillar and FANH Old

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

The idea behind Caterpillar and FANH 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 Global Correlations module to find global opportunities by holding instruments from different markets.