Correlation Between Caterpillar and Priveterra Acquisition

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

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

Diversification Opportunities for Caterpillar and Priveterra Acquisition

-0.32

Correlation Coefficient

Caterpillar  Priveterra Acquisition

Very good diversification

The 3 months correlation between Caterpillar and Priveterra is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Priveterra Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Priveterra Acquisition 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 Priveterra Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Priveterra Acquisition has no effect on the direction of Caterpillar i.e., Caterpillar and Priveterra Acquisition go up and down completely randomly.

Pair Corralation between Caterpillar and Priveterra Acquisition

If you would invest  32,527  in Caterpillar on September 5, 2024 and sell it today you would earn a total of  7,399  from holding Caterpillar or generate 22.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.18%
Values	Daily Returns

Caterpillar  vs.  Priveterra Acquisition Corp

Caterpillar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Priveterra Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Priveterra Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Priveterra Acquisition is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Priveterra Acquisition

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

The idea behind Caterpillar and Priveterra Acquisition 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.