Correlation Between Caterpillar and FLJ Old

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

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

Diversification Opportunities for Caterpillar and FLJ Old

0.0

Correlation Coefficient

Caterpillar  FLJ Old

Pay attention - limited upside

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

Pair Corralation between Caterpillar and FLJ Old

If you would invest (100.00) in FLJ Old on December 19, 2024 and sell it today you would earn a total of  100.00  from holding FLJ Old or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Caterpillar  vs.  FLJ Old

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.

FLJ Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days FLJ Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady essential indicators, FLJ Old is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Caterpillar and FLJ Old

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

The idea behind Caterpillar and FLJ 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..