Correlation Between Caterpillar and Cresco Labs
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Cresco Labs 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 Cresco Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Cresco Labs, you can compare the effects of market volatilities on Caterpillar and Cresco Labs 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 Cresco Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Cresco Labs.
Diversification Opportunities for Caterpillar and Cresco Labs
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Cresco is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs 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 Cresco Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresco Labs has no effect on the direction of Caterpillar i.e., Caterpillar and Cresco Labs go up and down completely randomly.
Pair Corralation between Caterpillar and Cresco Labs
Considering the 90-day investment horizon Caterpillar is expected to generate 0.32 times more return on investment than Cresco Labs. However, Caterpillar is 3.09 times less risky than Cresco Labs. It trades about 0.14 of its potential returns per unit of risk. Cresco Labs is currently generating about -0.05 per unit of risk. If you would invest 34,695 in Caterpillar on August 28, 2024 and sell it today you would earn a total of 6,088 from holding Caterpillar or generate 17.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Cresco Labs
Performance |
| Timeline |
| Caterpillar |
| Cresco Labs |
Caterpillar and Cresco Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Cresco Labs
The main advantage of trading using opposite Caterpillar and Cresco Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Cresco Labs 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 Cresco Labs will offset losses from the drop in Cresco Labs' long position.| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
| Cresco Labs vs. Verano Holdings Corp | Cresco Labs vs. AYR Strategies Class | Cresco Labs vs. Green Thumb Industries | Cresco Labs vs. Marimed |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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