Correlation Between Caterpillar and Wanderport Corp

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

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

Diversification Opportunities for Caterpillar and Wanderport Corp

-0.48

Correlation Coefficient

Caterpillar  Wanderport Corp

Very good diversification

The 3 months correlation between Caterpillar and Wanderport is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Wanderport Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wanderport Corp 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 Wanderport Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wanderport Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Wanderport Corp go up and down completely randomly.

Pair Corralation between Caterpillar and Wanderport Corp

Considering the 90-day investment horizon Caterpillar is expected to generate 0.18 times more return on investment than Wanderport Corp. However, Caterpillar is 5.54 times less risky than Wanderport Corp. It trades about 0.11 of its potential returns per unit of risk. Wanderport Corp is currently generating about 0.02 per unit of risk. If you would invest  35,483  in Caterpillar on August 30, 2024 and sell it today you would earn a total of  4,887  from holding Caterpillar or generate 13.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Wanderport Corp

Caterpillar

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Wanderport Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wanderport Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Wanderport Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Caterpillar and Wanderport Corp

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

The idea behind Caterpillar and Wanderport Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..