Correlation Between Caterpillar and Lion Electric
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Lion Electric 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 Lion Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Lion Electric Corp, you can compare the effects of market volatilities on Caterpillar and Lion Electric 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 Lion Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Lion Electric.
Diversification Opportunities for Caterpillar and Lion Electric
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Caterpillar and Lion is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Lion Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Electric 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 Lion Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Electric Corp has no effect on the direction of Caterpillar i.e., Caterpillar and Lion Electric go up and down completely randomly.
Pair Corralation between Caterpillar and Lion Electric
If you would invest 35,846 in Caterpillar on November 2, 2024 and sell it today you would earn a total of 3,477 from holding Caterpillar or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 5.26% |
| Values | Daily Returns |
Caterpillar vs. Lion Electric Corp
Performance |
| Timeline |
| Caterpillar |
| Lion Electric Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Caterpillar and Lion Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Lion Electric
The main advantage of trading using opposite Caterpillar and Lion Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Lion Electric 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 Lion Electric will offset losses from the drop in Lion Electric's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Lion Electric vs. Xos Inc | Lion Electric vs. Ideanomics | Lion Electric vs. Nikola Corp | Lion Electric vs. Wabash National |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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