Correlation Between Caterpillar and Fund X

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

Diversification Opportunities for Caterpillar and Fund X

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Caterpillar and FUNDX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Fund X Upgrader in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fund X Upgrader 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 Fund X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fund X Upgrader has no effect on the direction of Caterpillar i.e., Caterpillar and Fund X go up and down completely randomly.

Pair Corralation between Caterpillar and Fund X

Considering the 90-day investment horizon Caterpillar is expected to generate 1.69 times more return on investment than Fund X. However, Caterpillar is 1.69 times more volatile than Fund X Upgrader. It trades about 0.03 of its potential returns per unit of risk. Fund X Upgrader is currently generating about -0.04 per unit of risk. If you would invest  17,381  in Caterpillar on July 9, 2022 and sell it today you would earn a total of  500.00  from holding Caterpillar or generate 2.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Fund X Upgrader

 Performance (%) 
       Timeline  
Caterpillar 
Caterpillar Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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

Fund X Upgrader 
FUNDX Performance
0 of 100
Over the last 90 days Fund X Upgrader has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Fund X is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

FUNDX Price Channel

Caterpillar and Fund X Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Fund X

The main advantage of trading using opposite Caterpillar and Fund X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Fund X 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 Fund X will offset losses from the drop in Fund X's long position.
Caterpillar vs. Amazon Inc
The idea behind Caterpillar and Fund X Upgrader 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.
Fund X vs. JP Morgan Chase
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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