Correlation Between Caterpillar and ProShares Online

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

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

Diversification Opportunities for Caterpillar and ProShares Online

-0.06

Correlation Coefficient

Caterpillar  ProShares Online

Good diversification

The 3 months correlation between Caterpillar and ProShares is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ProShares Online Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Online Retail 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 Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Online Retail has no effect on the direction of Caterpillar i.e., Caterpillar and ProShares Online go up and down completely randomly.

Pair Corralation between Caterpillar and ProShares Online

Considering the 90-day investment horizon Caterpillar is expected to under-perform the ProShares Online. In addition to that, Caterpillar is 1.11 times more volatile than ProShares Online Retail. It trades about -0.19 of its total potential returns per unit of risk. ProShares Online Retail is currently generating about -0.03 per unit of volatility. If you would invest  4,685  in ProShares Online Retail on December 4, 2024 and sell it today you would lose (163.00) from holding ProShares Online Retail or give up 3.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Caterpillar  vs.  ProShares Online Retail

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 Online Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Online Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, ProShares Online is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caterpillar and ProShares Online

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

The idea behind Caterpillar and ProShares Online Retail 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.