Correlation Between Caterpillar and US Global

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

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

Diversification Opportunities for Caterpillar and US Global

0.74

Correlation Coefficient

Caterpillar  US Global

Poor diversification

The 3 months correlation between Caterpillar and JETS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and US Global Jets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Jets 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Jets has no effect on the direction of Caterpillar i.e., Caterpillar and US Global go up and down completely randomly.

Pair Corralation between Caterpillar and US Global

Considering the 90-day investment horizon Caterpillar is expected to generate 0.95 times more return on investment than US Global. However, Caterpillar is 1.05 times less risky than US Global. It trades about -0.05 of its potential returns per unit of risk. US Global Jets is currently generating about -0.16 per unit of risk. If you would invest  36,168  in Caterpillar on December 29, 2024 and sell it today you would lose (2,238) from holding Caterpillar or give up 6.19% of portfolio value over 90 days.

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

Caterpillar  vs.  US Global Jets

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 comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

US Global Jets

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Global Jets 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 Etf'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 exchange-traded fund private investors.

Pair Trading with Caterpillar and US Global

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

The idea behind Caterpillar and US Global Jets 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.