Correlation Between Bio-Path Holdings and Caterpillar

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

Diversification Opportunities for Bio-Path Holdings and Caterpillar

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Bio-Path and Caterpillar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bio-Path Holdings and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Bio-Path Holdings 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 Bio-Path 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 Bio-Path Holdings i.e., Bio-Path Holdings and Caterpillar go up and down completely randomly.

Pair Corralation between Bio-Path Holdings and Caterpillar

Given the investment horizon of 90 days Bio-Path Holdings is expected to under-perform the Caterpillar. In addition to that, Bio-Path Holdings is 1.4 times more volatile than Caterpillar. It trades about -0.12 of its total potential returns per unit of risk. Caterpillar is currently generating about -0.03 per unit of volatility. If you would invest  17,256  in Caterpillar on July 4, 2022 and sell it today you would lose (848.00)  from holding Caterpillar or give up 4.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bio-Path Holdings  vs.  Caterpillar

 Performance (%) 
       Timeline  
Bio-Path Holdings 
Bio-Path Performance
0 of 100
Over the last 90 days Bio-Path Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bio-Path Price Channel

Caterpillar 
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 comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Caterpillar Price Channel

Bio-Path Holdings and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bio-Path Holdings and Caterpillar

The main advantage of trading using opposite Bio-Path Holdings and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bio-Path Holdings 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.
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The idea behind Bio-Path 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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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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