Correlation Between Caterpillar and Strategic Asset

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

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

Diversification Opportunities for Caterpillar and Strategic Asset

0.96

Correlation Coefficient

Caterpillar  Strategic Asset

Almost no diversification

The 3 months correlation between Caterpillar and Strategic is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Strategic Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Asset Mana 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 Strategic Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Asset Mana has no effect on the direction of Caterpillar i.e., Caterpillar and Strategic Asset go up and down completely randomly.

Pair Corralation between Caterpillar and Strategic Asset

Considering the 90-day investment horizon Caterpillar is expected to generate 2.36 times more return on investment than Strategic Asset. However, Caterpillar is 2.36 times more volatile than Strategic Asset Management. It trades about 0.39 of its potential returns per unit of risk. Strategic Asset Management is currently generating about 0.21 per unit of risk. If you would invest  32,250  in Caterpillar on May 2, 2025 and sell it today you would earn a total of  11,552  from holding Caterpillar or generate 35.82% return on investment over 90 days.

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

Caterpillar  vs.  Strategic Asset Management

Caterpillar

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 30 (%) 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.

Strategic Asset Mana

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Asset Management are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Strategic Asset may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Caterpillar and Strategic Asset

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

The idea behind Caterpillar and Strategic Asset Management 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.