Correlation Between Caterpillar and Dataax

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

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

Diversification Opportunities for Caterpillar and Dataax

0.94

Correlation Coefficient

Caterpillar  Dataax

Almost no diversification

The 3 months correlation between Caterpillar and Dataax is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Dataax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dataax 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 Dataax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dataax has no effect on the direction of Caterpillar i.e., Caterpillar and Dataax go up and down completely randomly.

Pair Corralation between Caterpillar and Dataax

Considering the 90-day investment horizon Caterpillar is expected to generate 1.15 times more return on investment than Dataax. However, Caterpillar is 1.15 times more volatile than Dataax. It trades about 0.23 of its potential returns per unit of risk. Dataax is currently generating about 0.23 per unit of risk. If you would invest  35,125  in Caterpillar on May 13, 2025 and sell it today you would earn a total of  6,527  from holding Caterpillar or generate 18.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	93.65%
Values	Daily Returns

Caterpillar  vs.  Dataax

Caterpillar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 18 (%) 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.

Dataax

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dataax are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dataax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caterpillar and Dataax

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

The idea behind Caterpillar and Dataax 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.