Correlation Between Caterpillar and Wasatch Global

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

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

Diversification Opportunities for Caterpillar and Wasatch Global

0.43

Correlation Coefficient

Caterpillar  Wasatch Global

Very weak diversification

The 3 months correlation between Caterpillar and Wasatch is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Wasatch Global Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Global Oppor 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 Wasatch Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Global Oppor has no effect on the direction of Caterpillar i.e., Caterpillar and Wasatch Global go up and down completely randomly.

Pair Corralation between Caterpillar and Wasatch Global

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Wasatch Global. In addition to that, Caterpillar is 1.06 times more volatile than Wasatch Global Opportunities. It trades about -0.17 of its total potential returns per unit of risk. Wasatch Global Opportunities is currently generating about -0.16 per unit of volatility. If you would invest  503.00  in Wasatch Global Opportunities on November 29, 2024 and sell it today you would lose (66.00) from holding Wasatch Global Opportunities or give up 13.12% of portfolio value over 90 days.

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

Caterpillar  vs.  Wasatch Global Opportunities

Caterpillar

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Wasatch Global Oppor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Global Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Caterpillar and Wasatch Global

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

The idea behind Caterpillar and Wasatch Global Opportunities 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.