Correlation Between Caterpillar and Lincoln Park

Can any of the company-specific risk be diversified away by investing in both Caterpillar and Lincoln Park 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 Lincoln Park into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caterpillar and Lincoln Park Bancorp, you can compare the effects of market volatilities on Caterpillar and Lincoln Park 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 Lincoln Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Lincoln Park.

Diversification Opportunities for Caterpillar and Lincoln Park

0.0

Correlation Coefficient

Caterpillar  Lincoln Park

Pay attention - limited upside

The 3 months correlation between Caterpillar and Lincoln is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Lincoln Park Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Park Bancorp 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 Lincoln Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Park Bancorp has no effect on the direction of Caterpillar i.e., Caterpillar and Lincoln Park go up and down completely randomly.

Pair Corralation between Caterpillar and Lincoln Park

If you would invest  35,466  in Caterpillar on January 24, 2024 and sell it today you would earn a total of  295.00  from holding Caterpillar or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Caterpillar  vs.  Lincoln Park Bancorp

Caterpillar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lincoln Park Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lincoln Park Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Lincoln Park is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caterpillar and Lincoln Park

The main advantage of trading using opposite Caterpillar and Lincoln Park positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Lincoln Park 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 Lincoln Park will offset losses from the drop in Lincoln Park's long position.

The idea behind Caterpillar and Lincoln Park Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.