Correlation Between Caterpillar and Pfg Tactical

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

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

Diversification Opportunities for Caterpillar and Pfg Tactical

0.76

Correlation Coefficient

Caterpillar  Pfg Tactical

Poor diversification

The 3 months correlation between Caterpillar and Pfg is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Pfg Tactical Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfg Tactical Income 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 Pfg Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfg Tactical Income has no effect on the direction of Caterpillar i.e., Caterpillar and Pfg Tactical go up and down completely randomly.

Pair Corralation between Caterpillar and Pfg Tactical

Considering the 90-day investment horizon Caterpillar is expected to generate 4.29 times more return on investment than Pfg Tactical. However, Caterpillar is 4.29 times more volatile than Pfg Tactical Income. It trades about 0.05 of its potential returns per unit of risk. Pfg Tactical Income is currently generating about 0.05 per unit of risk. If you would invest  24,927  in Caterpillar on October 4, 2024 and sell it today you would earn a total of  11,034  from holding Caterpillar or generate 44.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Caterpillar  vs.  Pfg Tactical Income

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 uncertain 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.

Pfg Tactical Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfg Tactical Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pfg Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Pfg Tactical

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

The idea behind Caterpillar and Pfg Tactical Income 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.