Correlation Between Caterpillar and VictoryShares Emerging

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

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

Diversification Opportunities for Caterpillar and VictoryShares Emerging

0.95

Correlation Coefficient

Caterpillar  VictoryShares Emerging

Almost no diversification

The 3 months correlation between Caterpillar and VictoryShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and VictoryShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares Emerging 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 VictoryShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares Emerging has no effect on the direction of Caterpillar i.e., Caterpillar and VictoryShares Emerging go up and down completely randomly.

Pair Corralation between Caterpillar and VictoryShares Emerging

Considering the 90-day investment horizon Caterpillar is expected to generate 1.66 times more return on investment than VictoryShares Emerging. However, Caterpillar is 1.66 times more volatile than VictoryShares Emerging Markets. It trades about 0.08 of its potential returns per unit of risk. VictoryShares Emerging Markets is currently generating about 0.09 per unit of risk. If you would invest  35,845  in Caterpillar on May 4, 2025 and sell it today you would earn a total of  7,024  from holding Caterpillar or generate 19.6% 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.  VictoryShares Emerging Markets

Caterpillar

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 28 (%) 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.

VictoryShares Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares Emerging Markets are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VictoryShares Emerging may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Caterpillar and VictoryShares Emerging

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

The idea behind Caterpillar and VictoryShares Emerging Markets 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.