Correlation Between Caterpillar and LiveChain
Can any of the company-specific risk be diversified away by investing in both Caterpillar and LiveChain 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 LiveChain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and LiveChain, you can compare the effects of market volatilities on Caterpillar and LiveChain 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 LiveChain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and LiveChain.
Diversification Opportunities for Caterpillar and LiveChain
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and LiveChain is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and LiveChain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveChain 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 LiveChain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveChain has no effect on the direction of Caterpillar i.e., Caterpillar and LiveChain go up and down completely randomly.
Pair Corralation between Caterpillar and LiveChain
Considering the 90-day investment horizon Caterpillar is expected to generate 31.05 times less return on investment than LiveChain. But when comparing it to its historical volatility, Caterpillar is 19.02 times less risky than LiveChain. It trades about 0.06 of its potential returns per unit of risk. LiveChain is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.15 in LiveChain on November 5, 2024 and sell it today you would lose (1.75) from holding LiveChain or give up 81.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Caterpillar vs. LiveChain
Performance |
| Timeline |
| Caterpillar |
| LiveChain |
Caterpillar and LiveChain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and LiveChain
The main advantage of trading using opposite Caterpillar and LiveChain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, LiveChain 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 LiveChain will offset losses from the drop in LiveChain's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| LiveChain vs. CLST Holdings | LiveChain vs. Premier Products Group | LiveChain vs. Coastal Capital Acq | LiveChain vs. Jadeart Group |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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