Correlation Between Caterpillar and Québec Nickel

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

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

Diversification Opportunities for Caterpillar and Québec Nickel

0.75

Correlation Coefficient

Caterpillar  Québec Nickel

Poor diversification

The 3 months correlation between Caterpillar and Québec is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Qubec Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qubec Nickel 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 Québec Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qubec Nickel Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Québec Nickel go up and down completely randomly.

Pair Corralation between Caterpillar and Québec Nickel

Considering the 90-day investment horizon Caterpillar is expected to generate 0.09 times more return on investment than Québec Nickel. However, Caterpillar is 11.13 times less risky than Québec Nickel. It trades about -0.08 of its potential returns per unit of risk. Qubec Nickel Corp is currently generating about -0.02 per unit of risk. If you would invest  36,168  in Caterpillar on December 30, 2024 and sell it today you would lose (3,199) from holding Caterpillar or give up 8.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Caterpillar  vs.  Qubec Nickel 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 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.

Qubec Nickel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qubec Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Caterpillar and Québec Nickel

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

The idea behind Caterpillar and Qubec Nickel 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.