Correlation Between Lindsay and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Lindsay and Caterpillar 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 Lindsay and Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindsay and Caterpillar, you can compare the effects of market volatilities on Lindsay and Caterpillar 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 Lindsay with a short position of Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsay and Caterpillar.
Diversification Opportunities for Lindsay and Caterpillar
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lindsay and Caterpillar is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lindsay and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Lindsay 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 Lindsay are associated (or correlated) with Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Lindsay i.e., Lindsay and Caterpillar go up and down completely randomly.
Pair Corralation between Lindsay and Caterpillar
Considering the 90-day investment horizon Lindsay is expected to generate 0.71 times more return on investment than Caterpillar. However, Lindsay is 1.42 times less risky than Caterpillar. It trades about 0.48 of its potential returns per unit of risk. Caterpillar is currently generating about 0.1 per unit of risk. If you would invest 11,677 in Lindsay on November 3, 2024 and sell it today you would earn a total of 1,742 from holding Lindsay or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lindsay vs. Caterpillar
Performance |
| Timeline |
| Lindsay |
| Caterpillar |
Lindsay and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindsay and Caterpillar
The main advantage of trading using opposite Lindsay and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsay position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.| Lindsay vs. Columbus McKinnon | Lindsay vs. Astec Industries | Lindsay vs. Shyft Group | Lindsay vs. AGCO Corporation |
| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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