Correlation Between Caterpillar and FG Merger

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

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

Diversification Opportunities for Caterpillar and FG Merger

0.0

Correlation Coefficient

Caterpillar  FG Merger

Pay attention - limited upside

The 3 months correlation between Caterpillar and FGMCU is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and FG Merger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Merger 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 FG Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Merger Corp has no effect on the direction of Caterpillar i.e., Caterpillar and FG Merger go up and down completely randomly.

Pair Corralation between Caterpillar and FG Merger

If you would invest  38,565  in Caterpillar on October 24, 2024 and sell it today you would lose (104.00) from holding Caterpillar or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

Caterpillar  vs.  FG Merger Corp

Caterpillar

Risk-Adjusted Performance

0 of 100

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.

FG Merger Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FG Merger Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, FG Merger is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Caterpillar and FG Merger

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

The idea behind Caterpillar and FG Merger 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.