Correlation Between Caterpillar and Jackson Acquisition

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

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

Diversification Opportunities for Caterpillar and Jackson Acquisition

0.67

Correlation Coefficient

Caterpillar  Jackson Acquisition

Poor diversification

The 3 months correlation between Caterpillar and Jackson is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Jackson Acquisition Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jackson 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 Jackson Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jackson Acquisition has no effect on the direction of Caterpillar i.e., Caterpillar and Jackson Acquisition go up and down completely randomly.

Pair Corralation between Caterpillar and Jackson Acquisition

If you would invest  34,407  in Caterpillar on September 13, 2024 and sell it today you would earn a total of  4,432  from holding Caterpillar or generate 12.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Caterpillar  vs.  Jackson Acquisition Co

Caterpillar

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Jackson Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Caterpillar and Jackson Acquisition

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

The idea behind Caterpillar and Jackson Acquisition Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.