Correlation Between Caterpillar and Mojo Data

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

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

Diversification Opportunities for Caterpillar and Mojo Data

0.64

Correlation Coefficient

Caterpillar  Mojo Data

Poor diversification

The 3 months correlation between Caterpillar and Mojo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Mojo Data Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mojo Data Solutions 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 Mojo Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mojo Data Solutions has no effect on the direction of Caterpillar i.e., Caterpillar and Mojo Data go up and down completely randomly.

Pair Corralation between Caterpillar and Mojo Data

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Mojo Data. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 135.49 times less risky than Mojo Data. The stock trades about -0.35 of its potential returns per unit of risk. The Mojo Data Solutions is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.61  in Mojo Data Solutions on October 11, 2024 and sell it today you would lose (0.54) from holding Mojo Data Solutions or give up 88.52% of portfolio value over 90 days.

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

Caterpillar  vs.  Mojo Data Solutions

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 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.

Mojo Data Solutions

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Caterpillar and Mojo Data

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

The idea behind Caterpillar and Mojo Data Solutions 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.

Check out your portfolio center.

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..