Correlation Between Caterpillar and 1st Capital
Can any of the company-specific risk be diversified away by investing in both Caterpillar and 1st Capital 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 1st Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and 1st Capital Bank, you can compare the effects of market volatilities on Caterpillar and 1st Capital 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 1st Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and 1st Capital.
Diversification Opportunities for Caterpillar and 1st Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and 1st is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and 1st Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Capital Bank 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 1st Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Capital Bank has no effect on the direction of Caterpillar i.e., Caterpillar and 1st Capital go up and down completely randomly.
Pair Corralation between Caterpillar and 1st Capital
If you would invest 37,620 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 2,991 from holding Caterpillar or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 4.76% |
| Values | Daily Returns |
Caterpillar vs. 1st Capital Bank
Performance |
| Timeline |
| Caterpillar |
| 1st Capital Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
Caterpillar and 1st Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and 1st Capital
The main advantage of trading using opposite Caterpillar and 1st Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, 1st Capital 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 1st Capital will offset losses from the drop in 1st Capital'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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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