Correlation Between Caterpillar and Listed Funds
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Listed Funds 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 Listed Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Listed Funds Trust, you can compare the effects of market volatilities on Caterpillar and Listed Funds 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 Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Listed Funds.
Diversification Opportunities for Caterpillar and Listed Funds
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caterpillar and Listed is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust 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 Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of Caterpillar i.e., Caterpillar and Listed Funds go up and down completely randomly.
Pair Corralation between Caterpillar and Listed Funds
Considering the 90-day investment horizon Caterpillar is expected to generate 2.77 times more return on investment than Listed Funds. However, Caterpillar is 2.77 times more volatile than Listed Funds Trust. It trades about 0.1 of its potential returns per unit of risk. Listed Funds Trust is currently generating about 0.17 per unit of risk. If you would invest 32,883 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 7,728 from holding Caterpillar or generate 23.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Listed Funds Trust
Performance |
| Timeline |
| Caterpillar |
| Listed Funds Trust |
Caterpillar and Listed Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Listed Funds
The main advantage of trading using opposite Caterpillar and Listed Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Listed Funds 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 Listed Funds will offset losses from the drop in Listed Funds' long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
| Listed Funds vs. iShares Core SP | Listed Funds vs. iShares Core MSCI | Listed Funds vs. iShares Broad USD | Listed Funds vs. iShares Core SP |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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