Correlation Between Caterpillar and Heritage NOLA

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

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

Diversification Opportunities for Caterpillar and Heritage NOLA

-0.83

Correlation Coefficient

Caterpillar  Heritage NOLA

Pay attention - limited upside

The 1 month correlation between Caterpillar and Heritage is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Heritage NOLA Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage NOLA Bancorp 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 Heritage NOLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage NOLA Bancorp has no effect on the direction of Caterpillar i.e., Caterpillar and Heritage NOLA go up and down completely randomly.

Pair Corralation between Caterpillar and Heritage NOLA

Considering the 90-day investment horizon Caterpillar is expected to under-perform the Heritage NOLA. In addition to that, Caterpillar is 2.09 times more volatile than Heritage NOLA Bancorp. It trades about -0.16 of its total potential returns per unit of risk. Heritage NOLA Bancorp is currently generating about 0.1 per unit of volatility. If you would invest  1,430  in Heritage NOLA Bancorp on March 8, 2024 and sell it today you would earn a total of  19.00  from holding Heritage NOLA Bancorp or generate 1.33% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Caterpillar  vs.  Heritage NOLA Bancorp

Caterpillar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Heritage NOLA Bancorp

Risk-Adjusted Performance

7 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage NOLA Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Heritage NOLA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caterpillar and Heritage NOLA

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

The idea behind Caterpillar and Heritage NOLA Bancorp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.