Correlation Between Caterpillar and CSB Bancorp

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

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

Diversification Opportunities for Caterpillar and CSB Bancorp

0.55

Correlation Coefficient

Caterpillar  CSB Bancorp

Very weak diversification

The 3 months correlation between Caterpillar and CSB is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and CSB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSB 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 CSB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSB Bancorp has no effect on the direction of Caterpillar i.e., Caterpillar and CSB Bancorp go up and down completely randomly.

Pair Corralation between Caterpillar and CSB Bancorp

Considering the 90-day investment horizon Caterpillar is expected to generate 1.69 times more return on investment than CSB Bancorp. However, Caterpillar is 1.69 times more volatile than CSB Bancorp. It trades about 0.4 of its potential returns per unit of risk. CSB Bancorp is currently generating about 0.16 per unit of risk. If you would invest  31,281  in Caterpillar on May 1, 2025 and sell it today you would earn a total of  11,724  from holding Caterpillar or generate 37.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Caterpillar  vs.  CSB Bancorp

Caterpillar

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

CSB Bancorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CSB Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, CSB Bancorp may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Caterpillar and CSB Bancorp

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

The idea behind Caterpillar and CSB 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.