Correlation Between First Eagle and Caterpillar

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

Diversification Opportunities for First Eagle and Caterpillar

0.32
  Correlation Coefficient

Weak diversification

The 12 months correlation between First and Caterpillar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Eagle High and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and First Eagle 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 First Eagle High 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 First Eagle i.e., First Eagle and Caterpillar go up and down completely randomly.

Pair Corralation between First Eagle and Caterpillar

Assuming the 90 days horizon First Eagle High is expected to under-perform the Caterpillar. But the mutual fund apears to be less risky and, when comparing its historical volatility, First Eagle High is 6.37 times less risky than Caterpillar. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Caterpillar is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  18,553  in Caterpillar on September 1, 2022 and sell it today you would earn a total of  5,088  from holding Caterpillar or generate 27.42% return on investment over 90 days.
Time Period12 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

First Eagle High  vs.  Caterpillar

 Performance (%) 
       Timeline  
First Eagle High 
First Performance
0 of 100
Over the last 90 days First Eagle High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, First Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Price Channel

Caterpillar 
Caterpillar Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Caterpillar Price Channel

First Eagle and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Eagle and Caterpillar

The main advantage of trading using opposite First Eagle and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Eagle 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.
First Eagle vs. American Funds High-Income
The idea behind First Eagle High 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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