Correlation Between Caterpillar and COMCAST

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

Diversification Opportunities for Caterpillar and COMCAST

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Caterpillar and COMCAST is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and COMCAST PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMCAST PORATION 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 COMCAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMCAST PORATION has no effect on the direction of Caterpillar i.e., Caterpillar and COMCAST go up and down completely randomly.

Pair Corralation between Caterpillar and COMCAST

Considering the 90-day investment horizon Caterpillar is expected to generate 2.56 times more return on investment than COMCAST. However, Caterpillar is 2.56 times more volatile than COMCAST PORATION. It trades about 0.15 of its potential returns per unit of risk. COMCAST PORATION is currently generating about 0.23 per unit of risk. If you would invest  37,963  in Caterpillar on September 2, 2024 and sell it today you would earn a total of  2,648  from holding Caterpillar or generate 6.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Caterpillar  vs.  COMCAST PORATION

 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.
COMCAST PORATION 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COMCAST PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COMCAST is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Caterpillar and COMCAST Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caterpillar and COMCAST

The main advantage of trading using opposite Caterpillar and COMCAST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, COMCAST 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 COMCAST will offset losses from the drop in COMCAST's long position.
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The idea behind Caterpillar and COMCAST PORATION 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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