Correlation Between Faraday Future and Caterpillar

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

Diversification Opportunities for Faraday Future and Caterpillar

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Faraday and Caterpillar is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Faraday Future 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 Faraday Future Intelligent are associated (or correlated) with Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Faraday Future i.e., Faraday Future and Caterpillar go up and down completely randomly.

Pair Corralation between Faraday Future and Caterpillar

Given the investment horizon of 90 days Faraday Future Intelligent is expected to under-perform the Caterpillar. In addition to that, Faraday Future is 3.84 times more volatile than Caterpillar. It trades about -0.21 of its total potential returns per unit of risk. Caterpillar is currently generating about -0.1 per unit of volatility. If you would invest  18,066  in Caterpillar on July 6, 2022 and sell it today you would lose (943.00)  from holding Caterpillar or give up 5.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Faraday Future Intelligent  vs.  Caterpillar

 Performance (%) 
       Timeline  
Faraday Future Intel 
Faraday Performance
0 of 100
Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Faraday Price Channel

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

Faraday Future and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Faraday Future and Caterpillar

The main advantage of trading using opposite Faraday Future and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Future position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.
Faraday Future vs. Amazon Inc
The idea behind Faraday Future Intelligent and Caterpillar 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.
Caterpillar vs. Amazon Inc
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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