Correlation Between Caterpillar and CrossFirst Bankshares

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

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

Diversification Opportunities for Caterpillar and CrossFirst Bankshares

0.21

Correlation Coefficient

Caterpillar  CrossFirst Bankshares

Modest diversification

The 3 months correlation between Caterpillar and CrossFirst is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and CrossFirst Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrossFirst Bankshares 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 CrossFirst Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrossFirst Bankshares has no effect on the direction of Caterpillar i.e., Caterpillar and CrossFirst Bankshares go up and down completely randomly.

Pair Corralation between Caterpillar and CrossFirst Bankshares

If you would invest  29,200  in Caterpillar on February 10, 2025 and sell it today you would earn a total of  3,362  from holding Caterpillar or generate 11.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Caterpillar  vs.  CrossFirst Bankshares

Caterpillar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

CrossFirst Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Caterpillar and CrossFirst Bankshares

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

The idea behind Caterpillar and CrossFirst Bankshares 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.