Correlation Between Caterpillar and Blackrock

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

Diversification Opportunities for Caterpillar and Blackrock

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Caterpillar and Blackrock is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Blackrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock and Caterpillar 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 Caterpillar are associated (or correlated) with Blackrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock has no effect on the direction of Caterpillar i.e., Caterpillar and Blackrock go up and down completely randomly.

Pair Corralation between Caterpillar and Blackrock

Considering the 90-day investment horizon Caterpillar is expected to generate 2.06 times less return on investment than Blackrock. In addition to that, Caterpillar is 1.28 times more volatile than Blackrock. It trades about 0.14 of its total potential returns per unit of risk. Blackrock is currently generating about 0.38 per unit of volatility. If you would invest  60,500  in Blackrock on May 10, 2022 and sell it today you would earn a total of  9,093  from holding Blackrock or generate 15.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Blackrock

 Performance (%) 
       Timeline  
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 latest weak 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

Blackrock 
Blackrock Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Blackrock demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Blackrock Price Channel

Caterpillar and Blackrock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Blackrock

The main advantage of trading using opposite Caterpillar and Blackrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Blackrock 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 Blackrock will offset losses from the drop in Blackrock's long position.
The idea behind Caterpillar and Blackrock 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.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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