Correlation Between Caterpillar and Lixil Group
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Lixil Group 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 Lixil Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Lixil Group Corp, you can compare the effects of market volatilities on Caterpillar and Lixil Group 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 Lixil Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Lixil Group.
Diversification Opportunities for Caterpillar and Lixil Group
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Caterpillar and Lixil is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Lixil Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixil Group 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 Lixil Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixil Group Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Lixil Group go up and down completely randomly.
Pair Corralation between Caterpillar and Lixil Group
Considering the 90-day investment horizon Caterpillar is expected to under-perform the Lixil Group. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 1.48 times less risky than Lixil Group. The stock trades about -0.41 of its potential returns per unit of risk. The Lixil Group Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,213 in Lixil Group Corp on November 29, 2024 and sell it today you would earn a total of 96.00 from holding Lixil Group Corp or generate 4.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Lixil Group Corp
Performance |
| Timeline |
| Caterpillar |
| Lixil Group Corp |
Caterpillar and Lixil Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Lixil Group
The main advantage of trading using opposite Caterpillar and Lixil Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Lixil Group 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 Lixil Group will offset losses from the drop in Lixil Group's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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