Correlation Between Caterpillar and INTEL

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

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

Diversification Opportunities for Caterpillar and INTEL

0.53

Correlation Coefficient

Caterpillar  INTEL

Very weak diversification

The 3 months correlation between Caterpillar and INTEL is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and INTEL PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTEL PORATION 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 INTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTEL PORATION has no effect on the direction of Caterpillar i.e., Caterpillar and INTEL go up and down completely randomly.

Pair Corralation between Caterpillar and INTEL

Considering the 90-day investment horizon Caterpillar is expected to generate 1.25 times more return on investment than INTEL. However, Caterpillar is 1.25 times more volatile than INTEL PORATION. It trades about 0.1 of its potential returns per unit of risk. INTEL PORATION is currently generating about 0.03 per unit of risk. If you would invest  23,786  in Caterpillar on October 8, 2024 and sell it today you would earn a total of  12,593  from holding Caterpillar or generate 52.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.96%
Values	Daily Returns

Caterpillar  vs.  INTEL PORATION

Caterpillar

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

INTEL PORATION

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTEL PORATION are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, INTEL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Caterpillar and INTEL

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

The idea behind Caterpillar and INTEL PORATION 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.