Correlation Between Caterpillar and 50249AAF0

Can any of the company-specific risk be diversified away by investing in both Caterpillar and 50249AAF0 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 50249AAF0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and LYB 125 01 OCT 25, you can compare the effects of market volatilities on Caterpillar and 50249AAF0 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 50249AAF0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and 50249AAF0.

Diversification Opportunities for Caterpillar and 50249AAF0

-0.19

Correlation Coefficient

Caterpillar  50249AAF0

Good diversification

The 3 months correlation between Caterpillar and 50249AAF0 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and LYB 125 01 OCT 25 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYB 125 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 50249AAF0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYB 125 01 has no effect on the direction of Caterpillar i.e., Caterpillar and 50249AAF0 go up and down completely randomly.

Pair Corralation between Caterpillar and 50249AAF0

Considering the 90-day investment horizon Caterpillar is expected to under-perform the 50249AAF0. In addition to that, Caterpillar is 1.93 times more volatile than LYB 125 01 OCT 25. It trades about -0.07 of its total potential returns per unit of risk. LYB 125 01 OCT 25 is currently generating about -0.11 per unit of volatility. If you would invest  9,655  in LYB 125 01 OCT 25 on October 7, 2024 and sell it today you would lose (525.00) from holding LYB 125 01 OCT 25 or give up 5.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.13%
Values	Daily Returns

Caterpillar  vs.  LYB 125 01 OCT 25

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 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.

LYB 125 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYB 125 01 OCT 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent 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 LYB 125 01 OCT 25 investors.

Pair Trading with Caterpillar and 50249AAF0

The main advantage of trading using opposite Caterpillar and 50249AAF0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, 50249AAF0 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 50249AAF0 will offset losses from the drop in 50249AAF0's long position.

The idea behind Caterpillar and LYB 125 01 OCT 25 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.