Correlation Between Caterpillar and Clearbridge Variable
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Clearbridge Variable 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 Clearbridge Variable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Clearbridge Variable Appreciation, you can compare the effects of market volatilities on Caterpillar and Clearbridge Variable 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 Clearbridge Variable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Clearbridge Variable.
Diversification Opportunities for Caterpillar and Clearbridge Variable
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Clearbridge is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Clearbridge Variable Appreciat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Variable 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 Clearbridge Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Variable has no effect on the direction of Caterpillar i.e., Caterpillar and Clearbridge Variable go up and down completely randomly.
Pair Corralation between Caterpillar and Clearbridge Variable
Considering the 90-day investment horizon Caterpillar is expected to generate 2.8 times more return on investment than Clearbridge Variable. However, Caterpillar is 2.8 times more volatile than Clearbridge Variable Appreciation. It trades about 0.06 of its potential returns per unit of risk. Clearbridge Variable Appreciation is currently generating about 0.16 per unit of risk. If you would invest 38,706 in Caterpillar on August 25, 2024 and sell it today you would earn a total of 1,043 from holding Caterpillar or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Caterpillar vs. Clearbridge Variable Appreciat
Performance |
| Timeline |
| Caterpillar |
| Clearbridge Variable |
Caterpillar and Clearbridge Variable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Clearbridge Variable
The main advantage of trading using opposite Caterpillar and Clearbridge Variable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Clearbridge Variable 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 Clearbridge Variable will offset losses from the drop in Clearbridge Variable's 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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