Correlation Between Caterpillar and Picc Prop

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

Diversification Opportunities for Caterpillar and Picc Prop

-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Caterpillar and PPCCF is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Picc Prop Casualty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Picc Prop Casualty 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 Picc Prop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Picc Prop Casualty has no effect on the direction of Caterpillar i.e., Caterpillar and Picc Prop go up and down completely randomly.

Pair Corralation between Caterpillar and Picc Prop

Considering the 90-day investment horizon Caterpillar is expected to generate 1.18 times less return on investment than Picc Prop. But when comparing it to its historical volatility, Caterpillar is 1.62 times less risky than Picc Prop. It trades about 0.05 of its potential returns per unit of risk. Picc Prop Casualty is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  77.00  in Picc Prop Casualty on May 13, 2022 and sell it today you would earn a total of  29.00  from holding Picc Prop Casualty or generate 37.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Picc Prop Casualty

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

Caterpillar Price Channel

Picc Prop Casualty 
PPCCF Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Picc Prop Casualty are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Picc Prop may actually be approaching a critical reversion point that can send shares even higher in September 2022.

PPCCF Price Channel

Caterpillar and Picc Prop Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Picc Prop

The main advantage of trading using opposite Caterpillar and Picc Prop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Picc Prop 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 Picc Prop will offset losses from the drop in Picc Prop's long position.
The idea behind Caterpillar and Picc Prop Casualty 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.

Picc Prop Casualty

Pair trading matchups for Picc Prop

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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