Correlation Between Caterpillar and ProShares

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

By analyzing existing cross correlation between Caterpillar and ProShares SP 500, you can compare the effects of market volatilities on Caterpillar and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and ProShares.

Diversification Opportunities for Caterpillar and ProShares

0.98

Correlation Coefficient

Caterpillar  ProShares

Almost no diversification

The 3 months correlation between Caterpillar and ProShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Caterpillar i.e., Caterpillar and ProShares go up and down completely randomly.

Pair Corralation between Caterpillar and ProShares

Considering the 90-day investment horizon Caterpillar is expected to generate 2.05 times more return on investment than ProShares. However, Caterpillar is 2.05 times more volatile than ProShares SP 500. It trades about 0.41 of its potential returns per unit of risk. ProShares SP 500 is currently generating about 0.31 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  12,131  from holding Caterpillar or generate 38.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Caterpillar  vs.  ProShares SP 500

Caterpillar

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 32 (%) 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.

ProShares SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, ProShares may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Caterpillar and ProShares

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

The idea behind Caterpillar and ProShares SP 500 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.