Correlation Between BlockchainK2 Corp and Caterpillar

Can any of the company-specific risk be diversified away by investing in both BlockchainK2 Corp 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 BlockchainK2 Corp and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BlockchainK2 Corp and Caterpillar, you can compare the effects of market volatilities on BlockchainK2 Corp 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 BlockchainK2 Corp with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlockchainK2 Corp and Caterpillar.

Diversification Opportunities for BlockchainK2 Corp and Caterpillar

-0.44

Correlation Coefficient

BlockchainK2 Corp  Caterpillar

Very good diversification

The 3 months correlation between BlockchainK2 and Caterpillar is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding BlockchainK2 Corp and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and BlockchainK2 Corp 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 BlockchainK2 Corp 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 BlockchainK2 Corp i.e., BlockchainK2 Corp and Caterpillar go up and down completely randomly.

Pair Corralation between BlockchainK2 Corp and Caterpillar

Assuming the 90 days horizon BlockchainK2 Corp is expected to generate 1.67 times less return on investment than Caterpillar. In addition to that, BlockchainK2 Corp is 5.37 times more volatile than Caterpillar. It trades about 0.01 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.09 per unit of volatility. If you would invest  34,671  in Caterpillar on September 15, 2024 and sell it today you would earn a total of  3,380  from holding Caterpillar or generate 9.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BlockchainK2 Corp  vs.  Caterpillar

BlockchainK2 Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlockchainK2 Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, BlockchainK2 Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Caterpillar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Caterpillar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BlockchainK2 Corp and Caterpillar

The main advantage of trading using opposite BlockchainK2 Corp and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlockchainK2 Corp 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.

The idea behind BlockchainK2 Corp 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.

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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 the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.