Correlation Between Caterpillar and Reliq Health

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

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

Diversification Opportunities for Caterpillar and Reliq Health

-0.25

Correlation Coefficient

Caterpillar  Reliq Health

Very good diversification

The 3 months correlation between Caterpillar and Reliq is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Reliq Health Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliq Health Technologies 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 Reliq Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliq Health Technologies has no effect on the direction of Caterpillar i.e., Caterpillar and Reliq Health go up and down completely randomly.

Pair Corralation between Caterpillar and Reliq Health

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Reliq Health. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 91.57 times less risky than Reliq Health. The stock trades about -0.08 of its potential returns per unit of risk. The Reliq Health Technologies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.12  in Reliq Health Technologies on December 30, 2024 and sell it today you would lose (0.11) from holding Reliq Health Technologies or give up 91.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Caterpillar  vs.  Reliq Health Technologies

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.

Reliq Health Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reliq Health Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliq Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Reliq Health

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

The idea behind Caterpillar and Reliq Health Technologies 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.