Correlation Between Caterpillar and Locorr Market
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Locorr Market 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 Locorr Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Locorr Market Trend, you can compare the effects of market volatilities on Caterpillar and Locorr Market 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 Locorr Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Locorr Market.
Diversification Opportunities for Caterpillar and Locorr Market
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Locorr is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Locorr Market Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Market Trend 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 Locorr Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Market Trend has no effect on the direction of Caterpillar i.e., Caterpillar and Locorr Market go up and down completely randomly.
Pair Corralation between Caterpillar and Locorr Market
Considering the 90-day investment horizon Caterpillar is expected to generate 3.4 times more return on investment than Locorr Market. However, Caterpillar is 3.4 times more volatile than Locorr Market Trend. It trades about 0.16 of its potential returns per unit of risk. Locorr Market Trend is currently generating about 0.26 per unit of risk. 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Locorr Market Trend
Performance |
| Timeline |
| Caterpillar |
| Locorr Market Trend |
Caterpillar and Locorr Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Locorr Market
The main advantage of trading using opposite Caterpillar and Locorr Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Locorr Market 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 Locorr Market will offset losses from the drop in Locorr Market's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Locorr Market vs. Locorr Market Trend | Locorr Market vs. Locorr Market Trend | Locorr Market vs. Locorr Spectrum Income | Locorr Market vs. Locorr Spectrum Income |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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