Correlation Between Caterpillar and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Caterpillar and ProShares UltraShort 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 UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and ProShares UltraShort SP500, you can compare the effects of market volatilities on Caterpillar and ProShares UltraShort 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 UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and ProShares UltraShort.
Diversification Opportunities for Caterpillar and ProShares UltraShort
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caterpillar and ProShares is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Caterpillar i.e., Caterpillar and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Caterpillar and ProShares UltraShort
Considering the 90-day investment horizon Caterpillar is expected to generate 0.77 times more return on investment than ProShares UltraShort. However, Caterpillar is 1.29 times less risky than ProShares UltraShort. It trades about 0.02 of its potential returns per unit of risk. ProShares UltraShort SP500 is currently generating about -0.02 per unit of risk. If you would invest 35,202 in Caterpillar on March 14, 2025 and sell it today you would earn a total of 1,112 from holding Caterpillar or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. ProShares UltraShort SP500
Performance |
| Timeline |
| Caterpillar |
| ProShares UltraShort |
Caterpillar and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and ProShares UltraShort
The main advantage of trading using opposite Caterpillar and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, ProShares UltraShort 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 UltraShort will offset losses from the drop in ProShares UltraShort's long position.| Caterpillar vs. Hyster Yale Materials Handling | Caterpillar vs. Columbus McKinnon | Caterpillar vs. AGCO Corporation | Caterpillar vs. Titan International |
| ProShares UltraShort vs. ProShares UltraShort QQQ | ProShares UltraShort vs. ProShares UltraShort Dow30 | ProShares UltraShort vs. ProShares Ultra SP500 | ProShares UltraShort vs. ProShares Short SP500 |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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