Correlation Between Rems Real and Caterpillar

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

Diversification Opportunities for Rems Real and Caterpillar

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between HLPPX and Caterpillar is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rems Real Estate and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Rems Real 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 Rems Real Estate 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 Rems Real i.e., Rems Real and Caterpillar go up and down completely randomly.

Pair Corralation between Rems Real and Caterpillar

Assuming the 90 days horizon Rems Real Estate is expected to generate 0.62 times more return on investment than Caterpillar. However, Rems Real Estate is 1.61 times less risky than Caterpillar. It trades about -0.01 of its potential returns per unit of risk. Caterpillar is currently generating about -0.01 per unit of risk. If you would invest  1,265  in Rems Real Estate on May 9, 2022 and sell it today you would lose (63.00)  from holding Rems Real Estate or give up 4.98% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.63%
ValuesDaily Returns

Rems Real Estate  vs.  Caterpillar

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

HLPPX Price Channel

Caterpillar 
Caterpillar Performance
0 of 100
Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Caterpillar Price Channel

Rems Real and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rems Real and Caterpillar

The main advantage of trading using opposite Rems Real and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rems Real 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.

Rems Real Estate

Pair trading matchups for Rems Real

The idea behind Rems Real Estate 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.
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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