Correlation Between Caterpillar and Workday

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

Diversification Opportunities for Caterpillar and Workday

0.71
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Caterpillar and Workday

Considering the 90-day investment horizon Caterpillar is expected to generate 0.77 times more return on investment than Workday. However, Caterpillar is 1.31 times less risky than Workday. It trades about 0.02 of its potential returns per unit of risk. Workday is currently generating about -0.02 per unit of risk. If you would invest  15,179  in Caterpillar on June 30, 2022 and sell it today you would earn a total of  1,065  from holding Caterpillar or generate 7.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Workday

 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 abnormal 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

Workday 
Workday Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Workday are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Workday may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Workday Price Channel

Caterpillar and Workday Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Workday

The main advantage of trading using opposite Caterpillar and Workday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Workday 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 Workday will offset losses from the drop in Workday's long position.
Caterpillar vs. Clearwater Paper Corp
The idea behind Caterpillar and Workday 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.
Workday vs. Kibush Capital Corp
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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