Correlation Between Caterpillar and InBankshares Corp
Can any of the company-specific risk be diversified away by investing in both Caterpillar and InBankshares Corp 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 InBankshares Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and InBankshares Corp, you can compare the effects of market volatilities on Caterpillar and InBankshares Corp 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 InBankshares Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and InBankshares Corp.
Diversification Opportunities for Caterpillar and InBankshares Corp
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and InBankshares is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and InBankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InBankshares Corp 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 InBankshares Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InBankshares Corp has no effect on the direction of Caterpillar i.e., Caterpillar and InBankshares Corp go up and down completely randomly.
Pair Corralation between Caterpillar and InBankshares Corp
Considering the 90-day investment horizon Caterpillar is expected to generate 1.7 times more return on investment than InBankshares Corp. However, Caterpillar is 1.7 times more volatile than InBankshares Corp. It trades about 0.08 of its potential returns per unit of risk. InBankshares Corp is currently generating about 0.01 per unit of risk. If you would invest 22,477 in Caterpillar on September 1, 2024 and sell it today you would earn a total of 18,134 from holding Caterpillar or generate 80.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Caterpillar vs. InBankshares Corp
Performance |
| Timeline |
| Caterpillar |
| InBankshares Corp |
Caterpillar and InBankshares Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and InBankshares Corp
The main advantage of trading using opposite Caterpillar and InBankshares Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, InBankshares Corp 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 InBankshares Corp will offset losses from the drop in InBankshares Corp'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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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