Correlation Between Caterpillar and Stratim Cloud

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

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

Diversification Opportunities for Caterpillar and Stratim Cloud

-0.55

Correlation Coefficient

Caterpillar  Stratim Cloud

Excellent diversification

The 3 months correlation between Caterpillar and Stratim is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Stratim Cloud Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratim Cloud Acquisition 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 Stratim Cloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratim Cloud Acquisition has no effect on the direction of Caterpillar i.e., Caterpillar and Stratim Cloud go up and down completely randomly.

Pair Corralation between Caterpillar and Stratim Cloud

Considering the 90-day investment horizon Caterpillar is expected to generate 2.25 times more return on investment than Stratim Cloud. However, Caterpillar is 2.25 times more volatile than Stratim Cloud Acquisition. It trades about 0.08 of its potential returns per unit of risk. Stratim Cloud Acquisition is currently generating about 0.02 per unit of risk. If you would invest  22,712  in Caterpillar on September 3, 2024 and sell it today you would earn a total of  17,899  from holding Caterpillar or generate 78.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	30.71%
Values	Daily Returns

Caterpillar  vs.  Stratim Cloud Acquisition

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 fragile basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Stratim Cloud Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stratim Cloud Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stratim Cloud is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Caterpillar and Stratim Cloud

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

The idea behind Caterpillar and Stratim Cloud Acquisition 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.