Correlation Between Caterpillar and 459506AQ4

Can any of the company-specific risk be diversified away by investing in both Caterpillar and 459506AQ4 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 459506AQ4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and IFF 23 01 NOV 30, you can compare the effects of market volatilities on Caterpillar and 459506AQ4 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 459506AQ4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and 459506AQ4.

Diversification Opportunities for Caterpillar and 459506AQ4

-0.39

Correlation Coefficient

Caterpillar  459506AQ4

Very good diversification

The 3 months correlation between Caterpillar and 459506AQ4 is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and IFF 23 01 NOV 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IFF 23 01 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 459506AQ4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IFF 23 01 has no effect on the direction of Caterpillar i.e., Caterpillar and 459506AQ4 go up and down completely randomly.

Pair Corralation between Caterpillar and 459506AQ4

Considering the 90-day investment horizon Caterpillar is expected to generate 3.33 times more return on investment than 459506AQ4. However, Caterpillar is 3.33 times more volatile than IFF 23 01 NOV 30. It trades about 0.09 of its potential returns per unit of risk. IFF 23 01 NOV 30 is currently generating about -0.2 per unit of risk. If you would invest  34,671  in Caterpillar on September 15, 2024 and sell it today you would earn a total of  3,380  from holding Caterpillar or generate 9.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.5%
Values	Daily Returns

Caterpillar  vs.  IFF 23 01 NOV 30

Caterpillar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 6 (%) 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.

IFF 23 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IFF 23 01 NOV 30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for IFF 23 01 NOV 30 investors.

Pair Trading with Caterpillar and 459506AQ4

The main advantage of trading using opposite Caterpillar and 459506AQ4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, 459506AQ4 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 459506AQ4 will offset losses from the drop in 459506AQ4's long position.

The idea behind Caterpillar and IFF 23 01 NOV 30 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.