Correlation Between Caterpillar and G III

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

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

Diversification Opportunities for Caterpillar and G III

-0.22

Correlation Coefficient

Caterpillar  G III

Very good diversification

The 3 months correlation between Caterpillar and GI4 is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and G III Apparel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G III Apparel 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 G III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G III Apparel has no effect on the direction of Caterpillar i.e., Caterpillar and G III go up and down completely randomly.

Pair Corralation between Caterpillar and G III

Assuming the 90 days trading horizon Caterpillar is expected to generate 0.87 times more return on investment than G III. However, Caterpillar is 1.14 times less risky than G III. It trades about 0.08 of its potential returns per unit of risk. G III Apparel Group is currently generating about 0.04 per unit of risk. If you would invest  35,915  in Caterpillar on October 26, 2024 and sell it today you would earn a total of  3,285  from holding Caterpillar or generate 9.15% return on investment over 90 days.

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

Caterpillar  vs.  G III Apparel Group

Caterpillar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Caterpillar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

G III Apparel

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, G III is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Caterpillar and G III

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

The idea behind Caterpillar and G III Apparel Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.