Correlation Between Jabil Circuit and Caterpillar

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

Diversification Opportunities for Jabil Circuit and Caterpillar

  Correlation Coefficient

Almost no diversification

The 3 months correlation between Jabil and Caterpillar is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Jabil Circuit and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Jabil Circuit 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 Jabil Circuit 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 Jabil Circuit i.e., Jabil Circuit and Caterpillar go up and down completely randomly.

Pair Corralation between Jabil Circuit and Caterpillar

Considering the 90-day investment horizon Jabil Circuit is expected to generate 1.35 times more return on investment than Caterpillar. However, Jabil Circuit is 1.35 times more volatile than Caterpillar. It trades about 0.27 of its potential returns per unit of risk. Caterpillar is currently generating about 0.27 per unit of risk. If you would invest  6,417  in Jabil Circuit on September 1, 2022 and sell it today you would earn a total of  802.00  from holding Jabil Circuit or generate 12.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
ValuesDaily Returns

Jabil Circuit  vs.  Caterpillar

 Performance (%) 
Jabil Circuit 
Jabil Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Jabil Circuit are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Jabil Circuit revealed solid returns over the last few months and may actually be approaching a breakup point.

Jabil Price Channel

Caterpillar Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Caterpillar Price Channel

Jabil Circuit and Caterpillar Volatility Contrast

   Predicted Return Density   

Pair Trading with Jabil Circuit and Caterpillar

The main advantage of trading using opposite Jabil Circuit and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jabil Circuit 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.
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The idea behind Jabil Circuit 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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