Correlation Between Caterpillar and Filo Mining

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

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

Diversification Opportunities for Caterpillar and Filo Mining

-0.33

Correlation Coefficient

Caterpillar  Filo Mining

Very good diversification

The 3 months correlation between Caterpillar and Filo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Filo Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Filo Mining 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 Filo Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Filo Mining Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Filo Mining go up and down completely randomly.

Pair Corralation between Caterpillar and Filo Mining

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Filo Mining. In addition to that, Caterpillar is 2.2 times more volatile than Filo Mining Corp. It trades about -0.08 of its total potential returns per unit of risk. Filo Mining Corp is currently generating about -0.08 per unit of volatility. If you would invest  2,223  in Filo Mining Corp on December 29, 2024 and sell it today you would lose (19.00) from holding Filo Mining Corp or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.95%
Values	Daily Returns

Caterpillar  vs.  Filo Mining Corp

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.

Filo Mining Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Filo Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Filo Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caterpillar and Filo Mining

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

The idea behind Caterpillar and Filo Mining 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.