Correlation Between Caterpillar and Dupont De

Can any of the company-specific risk be diversified away by investing in both Caterpillar and Dupont De 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 Dupont De into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and Dupont De Nemours, you can compare the effects of market volatilities on Caterpillar and Dupont De 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 Dupont De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Dupont De.

Diversification Opportunities for Caterpillar and Dupont De

0.61

Correlation Coefficient

Caterpillar  Dupont De

Poor diversification

The 3 months correlation between Caterpillar and Dupont is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours 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 Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of Caterpillar i.e., Caterpillar and Dupont De go up and down completely randomly.

Pair Corralation between Caterpillar and Dupont De

Considering the 90-day investment horizon Caterpillar is expected to generate 1.04 times more return on investment than Dupont De. However, Caterpillar is 1.04 times more volatile than Dupont De Nemours. It trades about 0.07 of its potential returns per unit of risk. Dupont De Nemours is currently generating about 0.03 per unit of risk. If you would invest  20,258  in Caterpillar on January 19, 2024 and sell it today you would earn a total of  15,574  from holding Caterpillar or generate 76.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  Dupont De Nemours

Caterpillar

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 21 (%) 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.

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caterpillar and Dupont De

The main advantage of trading using opposite Caterpillar and Dupont De positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Dupont De 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 Dupont De will offset losses from the drop in Dupont De's long position.

The idea behind Caterpillar and Dupont De Nemours 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.