Correlation Between Caterpillar and BARRICK

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

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

Diversification Opportunities for Caterpillar and BARRICK

-0.41

Correlation Coefficient

Caterpillar  BARRICK

Very good diversification

The 3 months correlation between Caterpillar and BARRICK is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and BARRICK PD AUSTRALIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BARRICK PD AUSTRALIA 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 BARRICK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BARRICK PD AUSTRALIA has no effect on the direction of Caterpillar i.e., Caterpillar and BARRICK go up and down completely randomly.

Pair Corralation between Caterpillar and BARRICK

Considering the 90-day investment horizon Caterpillar is expected to generate 2.99 times more return on investment than BARRICK. However, Caterpillar is 2.99 times more volatile than BARRICK PD AUSTRALIA. It trades about 0.07 of its potential returns per unit of risk. BARRICK PD AUSTRALIA is currently generating about -0.12 per unit of risk. If you would invest  35,385  in Caterpillar on September 18, 2024 and sell it today you would earn a total of  2,507  from holding Caterpillar or generate 7.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.06%
Values	Daily Returns

Caterpillar  vs.  BARRICK PD AUSTRALIA

Caterpillar

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Caterpillar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BARRICK PD AUSTRALIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BARRICK PD AUSTRALIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BARRICK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and BARRICK

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

The idea behind Caterpillar and BARRICK PD AUSTRALIA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.