Correlation Between Grow Solutions and Caterpillar

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

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

Diversification Opportunities for Grow Solutions and Caterpillar

0.0

Correlation Coefficient

Grow Solutions  Caterpillar

Pay attention - limited upside

The 3 months correlation between Grow and Caterpillar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Grow Solutions Holdings and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Grow Solutions 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 Grow Solutions Holdings 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 Grow Solutions i.e., Grow Solutions and Caterpillar go up and down completely randomly.

Pair Corralation between Grow Solutions and Caterpillar

Given the investment horizon of 90 days Grow Solutions Holdings is expected to under-perform the Caterpillar. In addition to that, Grow Solutions is 2.61 times more volatile than Caterpillar. It trades about -0.04 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.07 per unit of volatility. If you would invest  23,134  in Caterpillar on September 13, 2024 and sell it today you would earn a total of  15,705  from holding Caterpillar or generate 67.89% return on investment over 90 days.

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

Grow Solutions Holdings  vs.  Caterpillar

Grow Solutions Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grow Solutions Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grow Solutions is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 inconsistent basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grow Solutions and Caterpillar

The main advantage of trading using opposite Grow Solutions and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grow Solutions 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 Grow Solutions Holdings 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 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..