Correlation Between Caterpillar and Nmb Financial

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

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

Diversification Opportunities for Caterpillar and Nmb Financial

-0.03

Correlation Coefficient

Caterpillar  Nmb Financial

Good diversification

The 3 months correlation between Caterpillar and Nmb is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Nmb Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nmb Financial 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 Nmb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nmb Financial Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Nmb Financial go up and down completely randomly.

Pair Corralation between Caterpillar and Nmb Financial

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Nmb Financial. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 1.14 times less risky than Nmb Financial. The stock trades about -0.05 of its potential returns per unit of risk. The Nmb Financial Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Nmb Financial Corp on December 28, 2024 and sell it today you would earn a total of  62.00  from holding Nmb Financial Corp or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Caterpillar  vs.  Nmb Financial Corp

Caterpillar

Risk-Adjusted Performance

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 comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Nmb Financial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nmb Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Nmb Financial 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 Nmb Financial

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

The idea behind Caterpillar and Nmb Financial 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.