Correlation Between Caterpillar and Tecsys

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

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

Diversification Opportunities for Caterpillar and Tecsys

-0.07

Correlation Coefficient

Caterpillar  Tecsys

Good diversification

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

Pair Corralation between Caterpillar and Tecsys

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Tecsys. In addition to that, Caterpillar is 1.58 times more volatile than Tecsys Inc. It trades about -0.04 of its total potential returns per unit of risk. Tecsys Inc is currently generating about 0.21 per unit of volatility. If you would invest  2,902  in Tecsys Inc on September 24, 2024 and sell it today you would earn a total of  426.00  from holding Tecsys Inc or generate 14.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Caterpillar  vs.  Tecsys Inc

Caterpillar

Risk-Adjusted Performance

0 of 100

Very Weak

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Tecsys Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tecsys Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tecsys reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Tecsys

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

The idea behind Caterpillar and Tecsys Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.