Correlation Between Caterpillar and Amarc Resources

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

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

Diversification Opportunities for Caterpillar and Amarc Resources

0.67

Correlation Coefficient

Caterpillar  Amarc Resources

Poor diversification

The 3 months correlation between Caterpillar and Amarc is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Amarc Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarc Resources and Caterpillar 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 Caterpillar are associated (or correlated) with Amarc Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarc Resources has no effect on the direction of Caterpillar i.e., Caterpillar and Amarc Resources go up and down completely randomly.

Pair Corralation between Caterpillar and Amarc Resources

Considering the 90-day investment horizon Caterpillar is expected to generate 1.06 times less return on investment than Amarc Resources. But when comparing it to its historical volatility, Caterpillar is 3.19 times less risky than Amarc Resources. It trades about 0.27 of its potential returns per unit of risk. Amarc Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Amarc Resources on May 11, 2025 and sell it today you would earn a total of  8.00  from holding Amarc Resources or generate 18.6% return on investment over 90 days.

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

Caterpillar  vs.  Amarc Resources

Caterpillar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 20 (%) 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.

Amarc Resources

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Amarc Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Amarc Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Amarc Resources

The main advantage of trading using opposite Caterpillar and Amarc Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Amarc Resources 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 Amarc Resources will offset losses from the drop in Amarc Resources' long position.

The idea behind Caterpillar and Amarc Resources 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.