Correlation Between Caterpillar and IShares Global

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

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

Diversification Opportunities for Caterpillar and IShares Global

-0.09

Correlation Coefficient

Caterpillar  IShares Global

Good diversification

The 3 months correlation between Caterpillar and IShares is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and iShares Global Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Energy 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Energy has no effect on the direction of Caterpillar i.e., Caterpillar and IShares Global go up and down completely randomly.

Pair Corralation between Caterpillar and IShares Global

Considering the 90-day investment horizon Caterpillar is expected to under-perform the IShares Global. In addition to that, Caterpillar is 1.67 times more volatile than iShares Global Energy. It trades about -0.08 of its total potential returns per unit of risk. iShares Global Energy is currently generating about 0.17 per unit of volatility. If you would invest  3,769  in iShares Global Energy on December 30, 2024 and sell it today you would earn a total of  407.00  from holding iShares Global Energy or generate 10.8% return on investment over 90 days.

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

Caterpillar  vs.  iShares Global Energy

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

iShares Global Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Caterpillar and IShares Global

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

The idea behind Caterpillar and iShares Global Energy 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.