Correlation Between Caterpillar and GiveMePower Corp

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

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

Diversification Opportunities for Caterpillar and GiveMePower Corp

-0.08

Correlation Coefficient

Caterpillar  GiveMePower Corp

Good diversification

The 3 months correlation between Caterpillar and GiveMePower is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and GiveMePower Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GiveMePower 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 GiveMePower Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GiveMePower Corp has no effect on the direction of Caterpillar i.e., Caterpillar and GiveMePower Corp go up and down completely randomly.

Pair Corralation between Caterpillar and GiveMePower Corp

Considering the 90-day investment horizon Caterpillar is expected to generate 0.07 times more return on investment than GiveMePower Corp. However, Caterpillar is 14.91 times less risky than GiveMePower Corp. It trades about -0.1 of its potential returns per unit of risk. GiveMePower Corp is currently generating about -0.29 per unit of risk. If you would invest  39,301  in Caterpillar on September 13, 2024 and sell it today you would lose (1,058) from holding Caterpillar or give up 2.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Caterpillar  vs.  GiveMePower Corp

Caterpillar

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

GiveMePower Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GiveMePower Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Caterpillar and GiveMePower Corp

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

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