Correlation Between Caterpillar and Latin Resources
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Latin Resources 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 Latin Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Latin Resources Limited, you can compare the effects of market volatilities on Caterpillar and Latin Resources 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 Latin Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Latin Resources.
Diversification Opportunities for Caterpillar and Latin Resources
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caterpillar and Latin is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Latin Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latin Resources 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 Latin Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latin Resources has no effect on the direction of Caterpillar i.e., Caterpillar and Latin Resources go up and down completely randomly.
Pair Corralation between Caterpillar and Latin Resources
Considering the 90-day investment horizon Caterpillar is expected to generate 15.92 times less return on investment than Latin Resources. But when comparing it to its historical volatility, Caterpillar is 37.38 times less risky than Latin Resources. It trades about 0.13 of its potential returns per unit of risk. Latin Resources Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Latin Resources Limited on September 1, 2024 and sell it today you would lose (5.00) from holding Latin Resources Limited or give up 27.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. Latin Resources Limited
Performance |
| Timeline |
| Caterpillar |
| Latin Resources |
Caterpillar and Latin Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and Latin Resources
The main advantage of trading using opposite Caterpillar and Latin Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Latin Resources 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 Latin Resources will offset losses from the drop in Latin Resources' long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| Latin Resources vs. Legacy Education | Latin Resources vs. Apple Inc | Latin Resources vs. NVIDIA | Latin Resources vs. Microsoft |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |