Correlation Between Caterpillar and VERSES AI

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

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

Diversification Opportunities for Caterpillar and VERSES AI

-0.5

Correlation Coefficient

Caterpillar  VERSES AI

Very good diversification

The 3 months correlation between Caterpillar and VERSES is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and VERSES AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERSES AI 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 VERSES AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERSES AI has no effect on the direction of Caterpillar i.e., Caterpillar and VERSES AI go up and down completely randomly.

Pair Corralation between Caterpillar and VERSES AI

Considering the 90-day investment horizon Caterpillar is expected to under-perform the VERSES AI. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 14.13 times less risky than VERSES AI. The stock trades about -0.07 of its potential returns per unit of risk. The VERSES AI is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  39.00  in VERSES AI on October 9, 2024 and sell it today you would earn a total of  97.00  from holding VERSES AI or generate 248.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Caterpillar  vs.  VERSES AI

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.

VERSES AI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VERSES AI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, VERSES AI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and VERSES AI

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

The idea behind Caterpillar and VERSES AI 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.