Correlation Between Caterpillar and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Caterpillar and First Bancorp 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 First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and First Bancorp, you can compare the effects of market volatilities on Caterpillar and First Bancorp 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 First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and First Bancorp.
Diversification Opportunities for Caterpillar and First Bancorp
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and First is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Caterpillar i.e., Caterpillar and First Bancorp go up and down completely randomly.
Pair Corralation between Caterpillar and First Bancorp
Considering the 90-day investment horizon Caterpillar is expected to generate 1.17 times more return on investment than First Bancorp. However, Caterpillar is 1.17 times more volatile than First Bancorp. It trades about 0.23 of its potential returns per unit of risk. First Bancorp is currently generating about 0.0 per unit of risk. If you would invest 34,577 in Caterpillar on August 28, 2025 and sell it today you would earn a total of 22,643 from holding Caterpillar or generate 65.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Caterpillar vs. First Bancorp
Performance |
| Timeline |
| Caterpillar |
| First Bancorp |
Caterpillar and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and First Bancorp
The main advantage of trading using opposite Caterpillar and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, First Bancorp 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Caterpillar vs. Pentair PLC | Caterpillar vs. China Resources Beer | Caterpillar vs. Bebida Beverage Co | Caterpillar vs. Fernhill Beverage |
| First Bancorp vs. Amexdrug | First Bancorp vs. CVR Medical Corp | First Bancorp vs. Harmony Gold Mining | First Bancorp vs. American Medical Technologies |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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