Correlation Between Caterpillar and BZAM
Can any of the company-specific risk be diversified away by investing in both Caterpillar and BZAM 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 BZAM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and BZAM, you can compare the effects of market volatilities on Caterpillar and BZAM 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 BZAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and BZAM.
Diversification Opportunities for Caterpillar and BZAM
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and BZAM is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Caterpillar i.e., Caterpillar and BZAM go up and down completely randomly.
Pair Corralation between Caterpillar and BZAM
Considering the 90-day investment horizon Caterpillar is expected to generate 241.64 times less return on investment than BZAM. But when comparing it to its historical volatility, Caterpillar is 91.09 times less risky than BZAM. It trades about 0.07 of its potential returns per unit of risk. BZAM is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.00 in BZAM on August 29, 2024 and sell it today you would earn a total of 0.00 from holding BZAM or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Caterpillar vs. BZAM
Performance |
| Timeline |
| Caterpillar |
| BZAM |
Caterpillar and BZAM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and BZAM
The main advantage of trading using opposite Caterpillar and BZAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, BZAM 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 BZAM will offset losses from the drop in BZAM's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| BZAM vs. Southwest Gas Holdings | BZAM vs. WEC Energy Group | BZAM vs. Topbuild Corp | BZAM vs. CenterPoint Energy |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like |