Correlation Between Ssga Sp and Caterpillar

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

By analyzing existing cross correlation between Ssga Sp 500 and Caterpillar, you can compare the effects of market volatilities on Ssga Sp 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 Ssga Sp with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ssga Sp and Caterpillar.

Diversification Opportunities for Ssga Sp and Caterpillar

0.0

Correlation Coefficient

Ssga Sp  Caterpillar

Pay attention - limited upside

The 3 months correlation between Ssga and Caterpillar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ssga Sp 500 and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Ssga Sp 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 Ssga Sp 500 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 Ssga Sp i.e., Ssga Sp and Caterpillar go up and down completely randomly.

Pair Corralation between Ssga Sp and Caterpillar

If you would invest  20,702  in Caterpillar on January 25, 2024 and sell it today you would earn a total of  15,669  from holding Caterpillar or generate 75.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.2%
Values	Daily Returns

Ssga Sp 500  vs.  Caterpillar

Ssga Sp 500

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Ssga Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ssga Sp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Caterpillar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ssga Sp and Caterpillar

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

The idea behind Ssga Sp 500 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 the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.