Correlation Between Caterpillar and WIZZ AIR

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

By analyzing existing cross correlation between Caterpillar and WIZZ AIR HLDGUNSPADR4, you can compare the effects of market volatilities on Caterpillar and WIZZ AIR 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 WIZZ AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and WIZZ AIR.

Diversification Opportunities for Caterpillar and WIZZ AIR

-0.64

Correlation Coefficient

Caterpillar  WIZZ AIR

Excellent diversification

The 3 months correlation between Caterpillar and WIZZ is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and WIZZ AIR HLDGUNSPADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIZZ AIR HLDGUNSPADR4 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 WIZZ AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIZZ AIR HLDGUNSPADR4 has no effect on the direction of Caterpillar i.e., Caterpillar and WIZZ AIR go up and down completely randomly.

Pair Corralation between Caterpillar and WIZZ AIR

Assuming the 90 days trading horizon Caterpillar is expected to under-perform the WIZZ AIR. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 2.75 times less risky than WIZZ AIR. The stock trades about -0.1 of its potential returns per unit of risk. The WIZZ AIR HLDGUNSPADR4 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  428.00  in WIZZ AIR HLDGUNSPADR4 on December 24, 2024 and sell it today you would earn a total of  68.00  from holding WIZZ AIR HLDGUNSPADR4 or generate 15.89% return on investment over 90 days.

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

Caterpillar  vs.  WIZZ AIR HLDGUNSPADR4

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

WIZZ AIR HLDGUNSPADR4

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WIZZ AIR HLDGUNSPADR4 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WIZZ AIR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and WIZZ AIR

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

The idea behind Caterpillar and WIZZ AIR HLDGUNSPADR4 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.