Correlation Between Caterpillar and Hyster Yale

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

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

Diversification Opportunities for Caterpillar and Hyster Yale

-0.05

Correlation Coefficient

Caterpillar  Hyster Yale

Good diversification

The 3 months correlation between Caterpillar and Hyster is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Hyster Yale Materials Handling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyster Yale Materials 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 Hyster Yale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyster Yale Materials has no effect on the direction of Caterpillar i.e., Caterpillar and Hyster Yale go up and down completely randomly.

Pair Corralation between Caterpillar and Hyster Yale

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Hyster Yale. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 1.56 times less risky than Hyster Yale. The stock trades about -0.03 of its potential returns per unit of risk. The Hyster Yale Materials Handling is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,284  in Hyster Yale Materials Handling on September 16, 2024 and sell it today you would earn a total of  222.00  from holding Hyster Yale Materials Handling or generate 4.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Hyster Yale Materials Handling

Caterpillar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Caterpillar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hyster Yale Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyster Yale Materials Handling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Hyster Yale is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Hyster Yale

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

The idea behind Caterpillar and Hyster Yale Materials Handling 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.