Correlation Between Intel and CATERPILLAR

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Can any of the company-specific risk be diversified away by investing in both Intel and CATERPILLAR 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 Intel and CATERPILLAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and CATERPILLAR INC 53, you can compare the effects of market volatilities on Intel and CATERPILLAR 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 Intel with a short position of CATERPILLAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and CATERPILLAR.

Diversification Opportunities for Intel and CATERPILLAR

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Intel and CATERPILLAR is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Intel and CATERPILLAR INC 53 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CATERPILLAR INC 53 and Intel 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 Intel are associated (or correlated) with CATERPILLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CATERPILLAR INC 53 has no effect on the direction of Intel i.e., Intel and CATERPILLAR go up and down completely randomly.

Pair Corralation between Intel and CATERPILLAR

Given the investment horizon of 90 days Intel is expected to under-perform the CATERPILLAR. In addition to that, Intel is 3.5 times more volatile than CATERPILLAR INC 53. It trades about -0.4 of its total potential returns per unit of risk. CATERPILLAR INC 53 is currently generating about 0.06 per unit of volatility. If you would invest  10,345  in CATERPILLAR INC 53 on September 12, 2024 and sell it today you would earn a total of  87.00  from holding CATERPILLAR INC 53 or generate 0.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Intel  vs.  CATERPILLAR INC 53

 Performance 
       Timeline  
Intel 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Intel may actually be approaching a critical reversion point that can send shares even higher in January 2025.
CATERPILLAR INC 53 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CATERPILLAR INC 53 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CATERPILLAR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intel and CATERPILLAR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Intel and CATERPILLAR

The main advantage of trading using opposite Intel and CATERPILLAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel position performs unexpectedly, CATERPILLAR 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 CATERPILLAR will offset losses from the drop in CATERPILLAR's long position.
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The idea behind Intel and CATERPILLAR INC 53 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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