Correlation Between CNHI Old and Caterpillar

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

By analyzing existing cross correlation between CNHI Old and Caterpillar, you can compare the effects of market volatilities on CNHI Old and Caterpillar 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 CNHI Old with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNHI Old and Caterpillar.

Diversification Opportunities for CNHI Old and Caterpillar

0.53

Correlation Coefficient

CNHI Old  Caterpillar

Very weak diversification

The 3 months correlation between CNHI and Caterpillar is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CNHI Old and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and CNHI Old 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 CNHI Old are associated (or correlated) with Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of CNHI Old i.e., CNHI Old and Caterpillar go up and down completely randomly.

Pair Corralation between CNHI Old and Caterpillar

If you would invest  1,145  in CNHI Old on October 10, 2024 and sell it today you would earn a total of  0.00  from holding CNHI Old or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

CNHI Old  vs.  Caterpillar

CNHI Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNHI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, CNHI Old is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with CNHI Old and Caterpillar

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

The idea behind CNHI Old and Caterpillar 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.