Correlation Between Caterpillar and ProShares Long

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

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

Diversification Opportunities for Caterpillar and ProShares Long

-0.17

Correlation Coefficient

Caterpillar  ProShares Long

Good diversification

The 3 months correlation between Caterpillar and ProShares is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ProShares Long OnlineShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Long Onlin 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 Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Long Onlin has no effect on the direction of Caterpillar i.e., Caterpillar and ProShares Long go up and down completely randomly.

Pair Corralation between Caterpillar and ProShares Long

Considering the 90-day investment horizon Caterpillar is expected to under-perform the ProShares Long. In addition to that, Caterpillar is 1.09 times more volatile than ProShares Long OnlineShort. It trades about -0.32 of its total potential returns per unit of risk. ProShares Long OnlineShort is currently generating about -0.15 per unit of volatility. If you would invest  5,013  in ProShares Long OnlineShort on December 4, 2024 and sell it today you would lose (214.00) from holding ProShares Long OnlineShort or give up 4.27% of portfolio value over 90 days.

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

Caterpillar  vs.  ProShares Long OnlineShort

Caterpillar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ProShares Long Onlin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Long OnlineShort are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, ProShares Long is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and ProShares Long

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

The idea behind Caterpillar and ProShares Long OnlineShort 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.