Correlation Between OFFICE DEPOT and Caterpillar

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

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

Diversification Opportunities for OFFICE DEPOT and Caterpillar

0.0

Correlation Coefficient

OFFICE DEPOT  Caterpillar

Pay attention - limited upside

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

Pair Corralation between OFFICE DEPOT and Caterpillar

If you would invest  1,920  in OFFICE DEPOT on October 7, 2024 and sell it today you would earn a total of  0.00  from holding OFFICE DEPOT or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

OFFICE DEPOT  vs.  Caterpillar

OFFICE DEPOT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OFFICE DEPOT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, OFFICE DEPOT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 rather sound basic indicators, Caterpillar is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with OFFICE DEPOT and Caterpillar

The main advantage of trading using opposite OFFICE DEPOT and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFFICE DEPOT 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 OFFICE DEPOT 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.