Correlation Between Caterpillar and Grupo México

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

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

Diversification Opportunities for Caterpillar and Grupo México

0.27

Correlation Coefficient

Caterpillar  Grupo México

Modest diversification

The 3 months correlation between Caterpillar and Grupo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Grupo Mxico SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Mxico SAB 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 Grupo México. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Mxico SAB has no effect on the direction of Caterpillar i.e., Caterpillar and Grupo México go up and down completely randomly.

Pair Corralation between Caterpillar and Grupo México

Considering the 90-day investment horizon Caterpillar is expected to generate 1.29 times more return on investment than Grupo México. However, Caterpillar is 1.29 times more volatile than Grupo Mxico SAB. It trades about 0.17 of its potential returns per unit of risk. Grupo Mxico SAB is currently generating about -0.18 per unit of risk. If you would invest  37,652  in Caterpillar on September 3, 2024 and sell it today you would earn a total of  2,959  from holding Caterpillar or generate 7.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Grupo Mxico SAB

Caterpillar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Grupo Mxico SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Mxico SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo México 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 Grupo México

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

The idea behind Caterpillar and Grupo Mxico SAB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.