Correlation Between Caterpillar and ATT

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

Diversification Opportunities for Caterpillar and ATT

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Caterpillar and ATT is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Caterpillar i.e., Caterpillar and ATT go up and down completely randomly.

Pair Corralation between Caterpillar and ATT

Considering the 90-day investment horizon Caterpillar is expected to generate 1.13 times more return on investment than ATT. However, Caterpillar is 1.13 times more volatile than ATT Inc. It trades about 0.29 of its potential returns per unit of risk. ATT Inc is currently generating about -0.27 per unit of risk. If you would invest  17,229  in Caterpillar on May 17, 2022 and sell it today you would earn a total of  2,455  from holding Caterpillar or generate 14.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  ATT Inc

 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Caterpillar Price Channel

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

ATT Price Channel

Caterpillar and ATT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and ATT

The main advantage of trading using opposite Caterpillar and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.
The idea behind Caterpillar and ATT Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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