Correlation Between Caterpillar and Galaxy Digital

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Can any of the company-specific risk be diversified away by investing in both Caterpillar and Galaxy Digital 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 Galaxy Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Galaxy Digital Holdings, you can compare the effects of market volatilities on Caterpillar and Galaxy Digital 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 Galaxy Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Galaxy Digital.

Diversification Opportunities for Caterpillar and Galaxy Digital

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Caterpillar and Galaxy is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Galaxy Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galaxy Digital Holdings 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 Galaxy Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galaxy Digital Holdings has no effect on the direction of Caterpillar i.e., Caterpillar and Galaxy Digital go up and down completely randomly.

Pair Corralation between Caterpillar and Galaxy Digital

Considering the 90-day investment horizon Caterpillar is expected to generate 3.05 times less return on investment than Galaxy Digital. But when comparing it to its historical volatility, Caterpillar is 3.18 times less risky than Galaxy Digital. It trades about 0.1 of its potential returns per unit of risk. Galaxy Digital Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,082  in Galaxy Digital Holdings on September 1, 2024 and sell it today you would earn a total of  729.00  from holding Galaxy Digital Holdings or generate 67.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Galaxy Digital Holdings

 Performance 
       Timeline  
Caterpillar 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
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.
Galaxy Digital Holdings 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Galaxy Digital Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Galaxy Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Caterpillar and Galaxy Digital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and Galaxy Digital

The main advantage of trading using opposite Caterpillar and Galaxy Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Galaxy Digital 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 Galaxy Digital will offset losses from the drop in Galaxy Digital's long position.
The idea behind Caterpillar and Galaxy Digital Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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