Correlation Between Caterpillar and Exchange Traded

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

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

Diversification Opportunities for Caterpillar and Exchange Traded

-0.72

Correlation Coefficient

Caterpillar  Exchange Traded

Pay attention - limited upside

The 3 months correlation between Caterpillar and Exchange is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Caterpillar i.e., Caterpillar and Exchange Traded go up and down completely randomly.

Pair Corralation between Caterpillar and Exchange Traded

Considering the 90-day investment horizon Caterpillar is expected to generate 9.4 times more return on investment than Exchange Traded. However, Caterpillar is 9.4 times more volatile than Exchange Traded Concepts. It trades about 0.4 of its potential returns per unit of risk. Exchange Traded Concepts is currently generating about 0.11 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 Against
Strength	Weak
Accuracy	42.62%
Values	Daily Returns

Caterpillar  vs.  Exchange Traded Concepts

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.

Exchange Traded Concepts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Traded Concepts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Exchange Traded is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Caterpillar and Exchange Traded

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

The idea behind Caterpillar and Exchange Traded Concepts 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.