Correlation Between Caterpillar and 512807AT5
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By analyzing existing cross correlation between Caterpillar and LAM RESEARCH PORATION, you can compare the effects of market volatilities on Caterpillar and 512807AT5 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 512807AT5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and 512807AT5.
Diversification Opportunities for Caterpillar and 512807AT5
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Caterpillar and 512807AT5 is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and LAM RESEARCH PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAM RESEARCH PORATION 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 512807AT5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAM RESEARCH PORATION has no effect on the direction of Caterpillar i.e., Caterpillar and 512807AT5 go up and down completely randomly.
Pair Corralation between Caterpillar and 512807AT5
Considering the 90-day investment horizon Caterpillar is expected to generate 2.37 times more return on investment than 512807AT5. However, Caterpillar is 2.37 times more volatile than LAM RESEARCH PORATION. It trades about 0.13 of its potential returns per unit of risk. LAM RESEARCH PORATION is currently generating about 0.18 per unit of risk. If you would invest 37,924 in Caterpillar on August 31, 2024 and sell it today you would earn a total of 2,446 from holding Caterpillar or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
Caterpillar vs. LAM RESEARCH PORATION
Performance |
| Timeline |
| Caterpillar |
| LAM RESEARCH PORATION |
Caterpillar and 512807AT5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and 512807AT5
The main advantage of trading using opposite Caterpillar and 512807AT5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, 512807AT5 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 512807AT5 will offset losses from the drop in 512807AT5's long position.| Caterpillar vs. Deere Company | Caterpillar vs. Lindsay | Caterpillar vs. Alamo Group | Caterpillar vs. Manitowoc |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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