Correlation Between Dycom Industries and Caterpillar

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

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

Diversification Opportunities for Dycom Industries and Caterpillar

0.92

Correlation Coefficient

Dycom Industries  Caterpillar

Almost no diversification

The 3 months correlation between Dycom and Caterpillar is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dycom Industries and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Dycom Industries 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 Dycom Industries 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 Dycom Industries i.e., Dycom Industries and Caterpillar go up and down completely randomly.

Pair Corralation between Dycom Industries and Caterpillar

Allowing for the 90-day total investment horizon Dycom Industries is expected to generate 1.78 times more return on investment than Caterpillar. However, Dycom Industries is 1.78 times more volatile than Caterpillar. It trades about 0.32 of its potential returns per unit of risk. Caterpillar is currently generating about 0.38 per unit of risk. If you would invest  16,447  in Dycom Industries on April 24, 2025 and sell it today you would earn a total of  8,821  from holding Dycom Industries or generate 53.63% return on investment over 90 days.

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

Dycom Industries  vs.  Caterpillar

Dycom Industries

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dycom Industries are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Dycom Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Caterpillar

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 29 (%) 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 Dycom Industries and Caterpillar

The main advantage of trading using opposite Dycom Industries and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dycom Industries 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 Dycom Industries 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.