Correlation Between Caterpillar and 983133AA7

Can any of the company-specific risk be diversified away by investing in both Caterpillar and 983133AA7 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 983133AA7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and WYNN RESORTS FIN, you can compare the effects of market volatilities on Caterpillar and 983133AA7 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 983133AA7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and 983133AA7.

Diversification Opportunities for Caterpillar and 983133AA7

0.64

Correlation Coefficient

Caterpillar  983133AA7

Poor diversification

The 3 months correlation between Caterpillar and 983133AA7 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and WYNN RESORTS FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WYNN RESORTS FIN 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 983133AA7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WYNN RESORTS FIN has no effect on the direction of Caterpillar i.e., Caterpillar and 983133AA7 go up and down completely randomly.

Pair Corralation between Caterpillar and 983133AA7

Considering the 90-day investment horizon Caterpillar is expected to under-perform the 983133AA7. In addition to that, Caterpillar is 6.32 times more volatile than WYNN RESORTS FIN. It trades about -0.05 of its total potential returns per unit of risk. WYNN RESORTS FIN is currently generating about -0.16 per unit of volatility. If you would invest  9,798  in WYNN RESORTS FIN on October 8, 2024 and sell it today you would lose (230.00) from holding WYNN RESORTS FIN or give up 2.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.32%
Values	Daily Returns

Caterpillar  vs.  WYNN RESORTS FIN

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.

WYNN RESORTS FIN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WYNN RESORTS FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 983133AA7 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 983133AA7

The main advantage of trading using opposite Caterpillar and 983133AA7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, 983133AA7 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 983133AA7 will offset losses from the drop in 983133AA7's long position.

The idea behind Caterpillar and WYNN RESORTS FIN 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.