Correlation Between Caterpillar and Nuveen ESG

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

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

Diversification Opportunities for Caterpillar and Nuveen ESG

0.66

Correlation Coefficient

Caterpillar  Nuveen ESG

Poor diversification

The 3 months correlation between Caterpillar and Nuveen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Nuveen ESG Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG Large 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 Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG Large has no effect on the direction of Caterpillar i.e., Caterpillar and Nuveen ESG go up and down completely randomly.

Pair Corralation between Caterpillar and Nuveen ESG

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Nuveen ESG. In addition to that, Caterpillar is 1.63 times more volatile than Nuveen ESG Large Cap. It trades about -0.05 of its total potential returns per unit of risk. Nuveen ESG Large Cap is currently generating about -0.07 per unit of volatility. If you would invest  4,567  in Nuveen ESG Large Cap on December 29, 2024 and sell it today you would lose (204.00) from holding Nuveen ESG Large Cap or give up 4.47% of portfolio value over 90 days.

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

Caterpillar  vs.  Nuveen ESG Large Cap

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.

Nuveen ESG Large

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Caterpillar and Nuveen ESG

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

The idea behind Caterpillar and Nuveen ESG Large Cap 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.