Correlation Between Caterpillar and Travelers Companies

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and The Travelers Companies, you can compare the effects of market volatilities on Caterpillar and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Travelers Companies.

Diversification Opportunities for Caterpillar and Travelers Companies

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Caterpillar and Travelers is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Caterpillar i.e., Caterpillar and Travelers Companies go up and down completely randomly.

Pair Corralation between Caterpillar and Travelers Companies

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Travelers Companies. In addition to that, Caterpillar is 1.51 times more volatile than The Travelers Companies. It trades about -0.01 of its total potential returns per unit of risk. The Travelers Companies is currently generating about 0.01 per unit of volatility. If you would invest  17,119  in The Travelers Companies on May 21, 2022 and sell it today you would earn a total of  114.00  from holding The Travelers Companies or generate 0.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  The Travelers Companies

 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

The Travelers Companies 
Travelers Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Travelers Price Channel

Caterpillar and Travelers Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Travelers Companies

The main advantage of trading using opposite Caterpillar and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.
The idea behind Caterpillar and The Travelers Companies 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

Other Complementary Tools

Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Money Managers
Screen money managers from public funds and ETFs managed around the world
Go
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Equity Valuation
Check real value of public entities based on technical and fundamental data
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Go