Correlation Between Caterpillar and Janus Henderson

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

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

Diversification Opportunities for Caterpillar and Janus Henderson

0.81

Correlation Coefficient

Caterpillar  Janus Henderson

Very poor diversification

The 3 months correlation between Caterpillar and Janus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Janus Henderson Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Henderson Sust 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 Janus Henderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Henderson Sust has no effect on the direction of Caterpillar i.e., Caterpillar and Janus Henderson go up and down completely randomly.

Pair Corralation between Caterpillar and Janus Henderson

Considering the 90-day investment horizon Caterpillar is expected to generate 2.3 times more return on investment than Janus Henderson. However, Caterpillar is 2.3 times more volatile than Janus Henderson Sustainable. It trades about 0.16 of its potential returns per unit of risk. Janus Henderson Sustainable is currently generating about 0.12 per unit of risk. If you would invest  33,554  in Caterpillar on September 4, 2024 and sell it today you would earn a total of  6,697  from holding Caterpillar or generate 19.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Janus Henderson Sustainable

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.

Janus Henderson Sust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Henderson Sustainable are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Janus Henderson is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and Janus Henderson

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

The idea behind Caterpillar and Janus Henderson Sustainable 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.