Correlation Between Caterpillar and Odyssey Group

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

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

Diversification Opportunities for Caterpillar and Odyssey Group

-0.38

Correlation Coefficient

Caterpillar  Odyssey Group

Very good diversification

The 3 months correlation between Caterpillar and Odyssey is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Odyssey Group International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odyssey Group Intern 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 Odyssey Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odyssey Group Intern has no effect on the direction of Caterpillar i.e., Caterpillar and Odyssey Group go up and down completely randomly.

Pair Corralation between Caterpillar and Odyssey Group

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Odyssey Group. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 6.86 times less risky than Odyssey Group. The stock trades about -0.42 of its potential returns per unit of risk. The Odyssey Group International is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2.70  in Odyssey Group International on October 10, 2024 and sell it today you would lose (0.20) from holding Odyssey Group International or give up 7.41% of portfolio value over 90 days.

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

Caterpillar  vs.  Odyssey Group International

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.

Odyssey Group Intern

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Odyssey Group International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Odyssey Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Odyssey Group

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

The idea behind Caterpillar and Odyssey Group International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.