Correlation Between Caterpillar and SPDR SSGA

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

By analyzing existing cross correlation between Caterpillar and SPDR SSGA My2032, you can compare the effects of market volatilities on Caterpillar and SPDR SSGA 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 SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and SPDR SSGA.

Diversification Opportunities for Caterpillar and SPDR SSGA

0.73

Correlation Coefficient

Caterpillar  SPDR SSGA

Poor diversification

The 3 months correlation between Caterpillar and SPDR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and SPDR SSGA My2032 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA My2032 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA My2032 has no effect on the direction of Caterpillar i.e., Caterpillar and SPDR SSGA go up and down completely randomly.

Pair Corralation between Caterpillar and SPDR SSGA

Considering the 90-day investment horizon Caterpillar is expected to generate 5.79 times more return on investment than SPDR SSGA. However, Caterpillar is 5.79 times more volatile than SPDR SSGA My2032. It trades about 0.2 of its potential returns per unit of risk. SPDR SSGA My2032 is currently generating about 0.17 per unit of risk. If you would invest  39,698  in Caterpillar on July 2, 2025 and sell it today you would earn a total of  7,463  from holding Caterpillar or generate 18.8% return on investment over 90 days.

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

Caterpillar  vs.  SPDR SSGA My2032

Caterpillar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 16 (%) 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.

SPDR SSGA My2032

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA My2032 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, SPDR SSGA is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Caterpillar and SPDR SSGA

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

The idea behind Caterpillar and SPDR SSGA My2032 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.