Correlation Between Advisors Capital and Caterpillar

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Can any of the company-specific risk be diversified away by investing in both Advisors Capital 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 Advisors Capital and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advisors Capital Tactical and Caterpillar, you can compare the effects of market volatilities on Advisors Capital 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 Advisors Capital with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advisors Capital and Caterpillar.

Diversification Opportunities for Advisors Capital and Caterpillar

  Correlation Coefficient

Poor diversification

The 3 months correlation between Advisors and Caterpillar is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Advisors Capital Tactical and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Advisors Capital 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 Advisors Capital Tactical 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 Advisors Capital i.e., Advisors Capital and Caterpillar go up and down completely randomly.

Pair Corralation between Advisors Capital and Caterpillar

Assuming the 90 days horizon Advisors Capital Tactical is expected to generate 0.14 times more return on investment than Caterpillar. However, Advisors Capital Tactical is 7.04 times less risky than Caterpillar. It trades about -0.48 of its potential returns per unit of risk. Caterpillar is currently generating about -0.41 per unit of risk. If you would invest  918.00  in Advisors Capital Tactical on June 29, 2022 and sell it today you would lose (23.00)  from holding Advisors Capital Tactical or give up 2.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Advisors Capital Tactical  vs.  Caterpillar

 Performance (%) 
Advisors Capital Tactical 
Advisors Performance
0 of 100
Over the last 90 days Advisors Capital Tactical has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Advisors Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Advisors Price Channel

Caterpillar Performance
0 of 100
Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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.

Caterpillar Price Channel

Advisors Capital and Caterpillar Volatility Contrast

   Predicted Return Density   

Pair Trading with Advisors Capital and Caterpillar

The main advantage of trading using opposite Advisors Capital and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advisors Capital 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.
Advisors Capital vs. Dupont Denemours
The idea behind Advisors Capital Tactical 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.
Caterpillar vs. Clearwater Paper Corp
Check out your portfolio center. 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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