Correlation Between Caterpillar and AXS TSLA

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

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

Diversification Opportunities for Caterpillar and AXS TSLA

-0.73

Correlation Coefficient

Caterpillar  AXS TSLA

Pay attention - limited upside

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

Pair Corralation between Caterpillar and AXS TSLA

Considering the 90-day investment horizon Caterpillar is expected to under-perform the AXS TSLA. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 5.28 times less risky than AXS TSLA. The stock trades about -0.08 of its potential returns per unit of risk. The AXS TSLA Bear is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,512  in AXS TSLA Bear on December 30, 2024 and sell it today you would earn a total of  1,913  from holding AXS TSLA Bear or generate 76.15% return on investment over 90 days.

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

Caterpillar  vs.  AXS TSLA Bear

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.

AXS TSLA Bear

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AXS TSLA Bear are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, AXS TSLA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and AXS TSLA

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

The idea behind Caterpillar and AXS TSLA Bear 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.