Correlation Between Caterpillar and LEGGETT
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By analyzing existing cross correlation between Caterpillar and LEGGETT PLATT INC, you can compare the effects of market volatilities on Caterpillar and LEGGETT 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 LEGGETT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and LEGGETT.
Diversification Opportunities for Caterpillar and LEGGETT
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Caterpillar and LEGGETT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and LEGGETT PLATT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGGETT PLATT INC 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 LEGGETT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGGETT PLATT INC has no effect on the direction of Caterpillar i.e., Caterpillar and LEGGETT go up and down completely randomly.
Pair Corralation between Caterpillar and LEGGETT
Considering the 90-day investment horizon Caterpillar is expected to under-perform the LEGGETT. In addition to that, Caterpillar is 2.1 times more volatile than LEGGETT PLATT INC. It trades about -0.42 of its total potential returns per unit of risk. LEGGETT PLATT INC is currently generating about -0.15 per unit of volatility. If you would invest 9,530 in LEGGETT PLATT INC on November 29, 2024 and sell it today you would lose (224.00) from holding LEGGETT PLATT INC or give up 2.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. LEGGETT PLATT INC
Performance |
| Timeline |
| Caterpillar |
| LEGGETT PLATT INC |
Caterpillar and LEGGETT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and LEGGETT
The main advantage of trading using opposite Caterpillar and LEGGETT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, LEGGETT 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 LEGGETT will offset losses from the drop in LEGGETT's long position.| Caterpillar vs. Aquagold International | Caterpillar vs. Thrivent High Yield | Caterpillar vs. Morningstar Unconstrained Allocation | Caterpillar vs. Via Renewables |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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