Correlation Between Abrdn Bloomberg and Caterpillar

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

Diversification Opportunities for Abrdn Bloomberg and Caterpillar

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Abrdn and Caterpillar is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Abrdn Bloomberg All and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Abrdn Bloomberg 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 Abrdn Bloomberg All 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 has no effect on the direction of Abrdn Bloomberg i.e., Abrdn Bloomberg and Caterpillar go up and down completely randomly.

Pair Corralation between Abrdn Bloomberg and Caterpillar

Considering the 90-day investment horizon Abrdn Bloomberg All is expected to under-perform the Caterpillar. But the etf apears to be less risky and, when comparing its historical volatility, Abrdn Bloomberg All is 2.22 times less risky than Caterpillar. The etf trades about -0.01 of its potential returns per unit of risk. The Caterpillar is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22,528  in Caterpillar on December 29, 2023 and sell it today you would earn a total of  13,937  from holding Caterpillar or generate 61.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

Abrdn Bloomberg All  vs.  Caterpillar

 Performance 
       Timeline  
Abrdn Bloomberg All 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Abrdn Bloomberg All are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Abrdn Bloomberg is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Caterpillar 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Abrdn Bloomberg and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Abrdn Bloomberg and Caterpillar

The main advantage of trading using opposite Abrdn Bloomberg and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abrdn Bloomberg 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.
The idea behind Abrdn Bloomberg All and Caterpillar 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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