Correlation Between Ideanomics and Caterpillar

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

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

Diversification Opportunities for Ideanomics and Caterpillar

0.13

Correlation Coefficient

Ideanomics  Caterpillar

Average diversification

The 3 months correlation between Ideanomics and Caterpillar is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ideanomics and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Ideanomics 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 Ideanomics 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 Ideanomics i.e., Ideanomics and Caterpillar go up and down completely randomly.

Pair Corralation between Ideanomics and Caterpillar

Given the investment horizon of 90 days Ideanomics is expected to generate 24.51 times more return on investment than Caterpillar. However, Ideanomics is 24.51 times more volatile than Caterpillar. It trades about 0.11 of its potential returns per unit of risk. Caterpillar is currently generating about 0.02 per unit of risk. If you would invest  94.00  in Ideanomics on September 20, 2024 and sell it today you would lose (92.96) from holding Ideanomics or give up 98.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.47%
Values	Daily Returns

Ideanomics  vs.  Caterpillar

Ideanomics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ideanomics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Ideanomics showed solid returns over the last few months and may actually be approaching a breakup point.

Caterpillar

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ideanomics and Caterpillar

The main advantage of trading using opposite Ideanomics and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ideanomics 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 Ideanomics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.