Correlation Between Caterpillar and Nabors Energy

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

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

Diversification Opportunities for Caterpillar and Nabors Energy

-0.55

Correlation Coefficient

Caterpillar  Nabors Energy

Excellent diversification

The 3 months correlation between Caterpillar and Nabors is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Nabors Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Energy Transition 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 Nabors Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Energy Transition has no effect on the direction of Caterpillar i.e., Caterpillar and Nabors Energy go up and down completely randomly.

Pair Corralation between Caterpillar and Nabors Energy

If you would invest  1,072  in Nabors Energy Transition on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Nabors Energy Transition or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.61%
Values	Daily Returns

Caterpillar  vs.  Nabors Energy Transition

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.

Nabors Energy Transition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Energy Transition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nabors Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caterpillar and Nabors Energy

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

The idea behind Caterpillar and Nabors Energy Transition 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.