Correlation Between Caterpillar and ProShares UltraPro
Can any of the company-specific risk be diversified away by investing in both Caterpillar and ProShares UltraPro 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 UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and ProShares UltraPro Dow30, you can compare the effects of market volatilities on Caterpillar and ProShares UltraPro 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 UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and ProShares UltraPro.
Diversification Opportunities for Caterpillar and ProShares UltraPro
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caterpillar and ProShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and ProShares UltraPro Dow30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Dow30 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 UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Dow30 has no effect on the direction of Caterpillar i.e., Caterpillar and ProShares UltraPro go up and down completely randomly.
Pair Corralation between Caterpillar and ProShares UltraPro
Considering the 90-day investment horizon Caterpillar is expected to generate 3.61 times less return on investment than ProShares UltraPro. But when comparing it to its historical volatility, Caterpillar is 1.19 times less risky than ProShares UltraPro. It trades about 0.09 of its potential returns per unit of risk. ProShares UltraPro Dow30 is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 9,466 in ProShares UltraPro Dow30 on August 30, 2024 and sell it today you would earn a total of 1,644 from holding ProShares UltraPro Dow30 or generate 17.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caterpillar vs. ProShares UltraPro Dow30
Performance |
| Timeline |
| Caterpillar |
| ProShares UltraPro Dow30 |
Caterpillar and ProShares UltraPro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caterpillar and ProShares UltraPro
The main advantage of trading using opposite Caterpillar and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, ProShares UltraPro 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 UltraPro will offset losses from the drop in ProShares UltraPro's long position.| Caterpillar vs. AGCO Corporation | Caterpillar vs. Nikola Corp | Caterpillar vs. PACCAR Inc | Caterpillar vs. Deere Company |
| ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro SP500 | ProShares UltraPro vs. ProShares UltraPro Russell2000 | ProShares UltraPro vs. Direxion Daily 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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