Correlation Between Caterpillar and Oklahoma College

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

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

Diversification Opportunities for Caterpillar and Oklahoma College

0.78

Correlation Coefficient

Caterpillar  Oklahoma College

Poor diversification

The 3 months correlation between Caterpillar and Oklahoma is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Oklahoma College Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma College Savings 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 Oklahoma College. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma College Savings has no effect on the direction of Caterpillar i.e., Caterpillar and Oklahoma College go up and down completely randomly.

Pair Corralation between Caterpillar and Oklahoma College

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Oklahoma College. In addition to that, Caterpillar is 2.95 times more volatile than Oklahoma College Savings. It trades about -0.05 of its total potential returns per unit of risk. Oklahoma College Savings is currently generating about -0.03 per unit of volatility. If you would invest  1,491  in Oklahoma College Savings on October 8, 2024 and sell it today you would lose (17.00) from holding Oklahoma College Savings or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Caterpillar  vs.  Oklahoma College Savings

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 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.

Oklahoma College Savings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oklahoma College Savings has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Oklahoma College is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Oklahoma College

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

The idea behind Caterpillar and Oklahoma College Savings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.