Correlation Between Caterpillar and Simplify Equity

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

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

Diversification Opportunities for Caterpillar and Simplify Equity

0.73

Correlation Coefficient

Caterpillar  Simplify Equity

Poor diversification

The 3 months correlation between Caterpillar and Simplify is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Caterpillar i.e., Caterpillar and Simplify Equity go up and down completely randomly.

Pair Corralation between Caterpillar and Simplify Equity

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Simplify Equity. In addition to that, Caterpillar is 1.58 times more volatile than Simplify Equity PLUS. It trades about -0.08 of its total potential returns per unit of risk. Simplify Equity PLUS is currently generating about -0.12 per unit of volatility. If you would invest  3,360  in Simplify Equity PLUS on December 30, 2024 and sell it today you would lose (276.00) from holding Simplify Equity PLUS or give up 8.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Simplify Equity PLUS

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.

Simplify Equity PLUS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Equity PLUS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Caterpillar and Simplify Equity

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

The idea behind Caterpillar and Simplify Equity PLUS 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.