Correlation Between Caterpillar and Blackstone Minerals

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

By analyzing existing cross correlation between Caterpillar and Blackstone Minerals, you can compare the effects of market volatilities on Caterpillar and Blackstone Minerals 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 Blackstone Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Blackstone Minerals.

Diversification Opportunities for Caterpillar and Blackstone Minerals

0.07

Correlation Coefficient

Caterpillar  Blackstone Minerals

Significant diversification

The 3 months correlation between Caterpillar and Blackstone is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Blackstone Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackstone Minerals 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 Blackstone Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackstone Minerals has no effect on the direction of Caterpillar i.e., Caterpillar and Blackstone Minerals go up and down completely randomly.

Pair Corralation between Caterpillar and Blackstone Minerals

Considering the 90-day investment horizon Caterpillar is expected to generate 63.53 times less return on investment than Blackstone Minerals. But when comparing it to its historical volatility, Caterpillar is 72.75 times less risky than Blackstone Minerals. It trades about 0.16 of its potential returns per unit of risk. Blackstone Minerals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Blackstone Minerals on September 2, 2024 and sell it today you would lose (1.10) from holding Blackstone Minerals or give up 36.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Caterpillar  vs.  Blackstone Minerals

Caterpillar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blackstone Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Minerals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Blackstone Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Blackstone Minerals

The main advantage of trading using opposite Caterpillar and Blackstone Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Blackstone Minerals 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 Blackstone Minerals will offset losses from the drop in Blackstone Minerals' long position.

The idea behind Caterpillar and Blackstone Minerals 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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.