Correlation Between Caterpillar and CoastalSouth Bancshares
Can any of the company-specific risk be diversified away by investing in both Caterpillar and CoastalSouth Bancshares 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 CoastalSouth Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and CoastalSouth Bancshares, you can compare the effects of market volatilities on Caterpillar and CoastalSouth Bancshares 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 CoastalSouth Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and CoastalSouth Bancshares.
Diversification Opportunities for Caterpillar and CoastalSouth Bancshares
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and CoastalSouth is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and CoastalSouth Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoastalSouth Bancshares 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 CoastalSouth Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoastalSouth Bancshares has no effect on the direction of Caterpillar i.e., Caterpillar and CoastalSouth Bancshares go up and down completely randomly.
Pair Corralation between Caterpillar and CoastalSouth Bancshares
Considering the 90-day investment horizon Caterpillar is expected to generate 1.04 times less return on investment than CoastalSouth Bancshares. But when comparing it to its historical volatility, Caterpillar is 1.56 times less risky than CoastalSouth Bancshares. It trades about 0.1 of its potential returns per unit of risk. CoastalSouth Bancshares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,750 in CoastalSouth Bancshares on September 1, 2024 and sell it today you would earn a total of 375.00 from holding CoastalSouth Bancshares or generate 21.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Caterpillar vs. CoastalSouth Bancshares
Performance |
| Timeline |
| Caterpillar |
| CoastalSouth Bancshares |
Caterpillar and CoastalSouth Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and CoastalSouth Bancshares
The main advantage of trading using opposite Caterpillar and CoastalSouth Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, CoastalSouth Bancshares 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 CoastalSouth Bancshares will offset losses from the drop in CoastalSouth Bancshares' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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