Correlation Between AYRO and Caterpillar

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

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

Diversification Opportunities for AYRO and Caterpillar

-0.13

Correlation Coefficient

AYRO  Caterpillar

Good diversification

The 3 months correlation between AYRO and Caterpillar is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding AYRO Inc and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and AYRO 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 AYRO Inc 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 AYRO i.e., AYRO and Caterpillar go up and down completely randomly.

Pair Corralation between AYRO and Caterpillar

Given the investment horizon of 90 days AYRO Inc is expected to under-perform the Caterpillar. In addition to that, AYRO is 3.53 times more volatile than Caterpillar. It trades about 0.0 of its total potential returns per unit of risk. Caterpillar is currently generating about 0.35 per unit of volatility. If you would invest  32,193  in Caterpillar on May 5, 2025 and sell it today you would earn a total of  10,676  from holding Caterpillar or generate 33.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AYRO Inc  vs.  Caterpillar

AYRO Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days AYRO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AYRO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Caterpillar

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AYRO and Caterpillar

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