Caterpillar Stock Volatility
| CAT Stock | USD 405.65 8.16 2.05% |
Caterpillar appears to be very steady, given 3 months investment horizon. Caterpillar secures Sharpe Ratio (or Efficiency) of 0.11, which signifies that the company had a 0.11% return per unit of risk over the last 3 months. We have found twenty-nine technical indicators for Caterpillar, which you can use to evaluate the volatility of the firm. Please makes use of Caterpillar's Downside Deviation of 1.64, risk adjusted performance of 0.1055, and Mean Deviation of 1.32 to double-check if our risk estimates are consistent with your expectations. Key indicators related to Caterpillar's volatility include:
660 Days Market Risk | Chance Of Distress | 660 Days Economic Sensitivity |
Caterpillar Stock volatility depicts how high the prices fluctuate around the mean (or its average) price. In other words, it is a statistical measure of the distribution of Caterpillar daily returns, and it is calculated using variance and standard deviation. We also use Caterpillar's beta, its sensitivity to the market, as well as its odds of financial distress to provide a more practical estimation of Caterpillar volatility.
Caterpillar |
ESG Sustainability
While most ESG disclosures are voluntary, Caterpillar's sustainability indicators can be used to identify proper investment strategies using environmental, social, and governance scores that are crucial to Caterpillar's managers and investors.Environmental | Governance | Social |
Since volatility provides investors with entry points to take advantage of stock prices, companies, such as Caterpillar can benefit from it. Downward market volatility can be a perfect environment for investors who play the long game. Here, they may decide to buy additional stocks of Caterpillar at lower prices. For example, an investor can purchase Caterpillar stock that has halved in price over a short period. This will lower your average cost per share, thereby improving your portfolio's performance when the markets normalize. Similarly, when the prices of Caterpillar's stock rises, investors can sell out and invest the proceeds in other equities with better opportunities. Investing when markets are volatile with better valuations will accord both investors and companies the opportunity to generate better long-term returns.
Moving together with Caterpillar Stock
| 0.75 | DE | Deere Company Fiscal Year End 27th of November 2024 | PairCorr |
| 0.8 | CNH | CNH Industrial NV Symbol Change | PairCorr |
Moving against Caterpillar Stock
| 0.72 | ARTW | Arts Way Manufacturing | PairCorr |
| 0.66 | NKLA | Nikola Corp | PairCorr |
| 0.63 | TWI | Titan International | PairCorr |
| 0.51 | LEV | Lion Electric Corp | PairCorr |
| 0.41 | KUBTY | Kubota Corp ADR | PairCorr |
| 0.33 | CEADW | CEA Industries Warrant | PairCorr |
Caterpillar Market Sensitivity And Downside Risk
Caterpillar's beta coefficient measures the volatility of Caterpillar stock compared to the systematic risk of the entire market represented by your selected benchmark. In mathematical terms, beta represents the slope of the line through a regression of data points where each of these points represents Caterpillar stock's returns against your selected market. In other words, Caterpillar's beta of 1.87 provides an investor with an approximation of how much risk Caterpillar stock can potentially add to one of your existing portfolios. Caterpillar has relatively low volatility with skewness of 1.3 and kurtosis of 5.5. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Caterpillar's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Caterpillar's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different financial instruments as prices fall.
3 Months Beta |Analyze Caterpillar Demand TrendCheck current 90 days Caterpillar correlation with market (Dow Jones Industrial)Caterpillar Beta |
Caterpillar standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. A typical volatile entity has a high standard deviation, while the deviation of a stable instrument is usually low. As a downside, the standard deviation calculates all uncertainty as risk, even when it is in your favor, such as above-average returns.
Standard Deviation | 1.95 |
It is essential to understand the difference between upside risk (as represented by Caterpillar's standard deviation) and the downside risk, which can be measured by semi-deviation or downside deviation of Caterpillar's daily returns or price. Since the actual investment returns on holding a position in caterpillar stock tend to have a non-normal distribution, there will be different probabilities for losses than for gains. The likelihood of losses is reflected in the downside risk of an investment in Caterpillar.
Caterpillar Stock Volatility Analysis
Volatility refers to the frequency at which Caterpillar stock price increases or decreases within a specified period. These fluctuations usually indicate the level of risk that's associated with Caterpillar's price changes. Investors will then calculate the volatility of Caterpillar's stock to predict their future moves. A stock that has erratic price changes quickly hits new highs, and lows are considered highly volatile. A stock with relatively stable price changes has low volatility. A highly volatile stock is riskier, but the risk cuts both ways. Investing in highly volatile security can either be highly successful, or you may experience significant failure. There are two main types of Caterpillar's volatility:
Historical Volatility
This type of stock volatility measures Caterpillar's fluctuations based on previous trends. It's commonly used to predict Caterpillar's future behavior based on its past. However, it cannot conclusively determine the future direction of the stock.Implied Volatility
This type of volatility provides a positive outlook on future price fluctuations for Caterpillar's current market price. This means that the stock will return to its initially predicted market price. This type of volatility can be derived from derivative instruments written on Caterpillar's to be redeemed at a future date.Transformation |
The output start index for this execution was zero with a total number of output elements of sixty-one. Caterpillar Average Price is the average of the sum of open, high, low and close daily prices of a bar. It can be used to smooth an indicator that normally takes just the closing price as input.
Caterpillar Projected Return Density Against Market
Considering the 90-day investment horizon the stock has the beta coefficient of 1.8697 suggesting as the benchmark fluctuates upward, the company is expected to outperform it on average. However, if the benchmark returns are projected to be negative, Caterpillar will likely underperform.Most traded equities are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Caterpillar or Machinery sector will adversely affect the stock's price. This type of risk can be diversified away by owning several different stocks in different industries whose stock prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Caterpillar's price will be affected by overall stock market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Caterpillar stock's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.
Caterpillar has an alpha of 0.0141, implying that it can generate a 0.0141 percent excess return over Dow Jones Industrial after adjusting for the inherited market risk (beta). Predicted Return Density |
| Returns |
What Drives a Caterpillar Price Volatility?
Several factors can influence a stock's market volatility:Industry
Specific events can influence volatility within a particular industry. For instance, a significant weather upheaval in a crucial oil-production site may cause oil prices to increase in the oil sector. The direct result will be the rise in the stock price of oil distribution companies. Similarly, any government regulation in a specific industry could negatively influence stock prices due to increased regulations on compliance that may impact the company's future earnings and growth.Political and Economic environment
When governments make significant decisions regarding trade agreements, policies, and legislation regarding specific industries, they will influence stock prices. Everything from speeches to elections may influence investors, who can directly influence the stock prices in any particular industry. The prevailing economic situation also plays a significant role in stock prices. When the economy is doing well, investors will have a positive reaction and hence, better stock prices and vice versa.The Company's Performance
Sometimes volatility will only affect an individual company. For example, a revolutionary product launch or strong earnings report may attract many investors to purchase the company. This positive attention will raise the company's stock price. In contrast, product recalls and data breaches may negatively influence a company's stock prices.Caterpillar Stock Risk Measures
Considering the 90-day investment horizon the coefficient of variation of Caterpillar is 892.77. The daily returns are distributed with a variance of 3.79 and standard deviation of 1.95. The mean deviation of Caterpillar is currently at 1.32. For similar time horizon, the selected benchmark (Dow Jones Industrial) has volatility of 0.77
α | Alpha over Dow Jones | 0.01 | |
β | Beta against Dow Jones | 1.87 | |
σ | Overall volatility | 1.95 | |
Ir | Information ratio | 0.06 |
Caterpillar Stock Return Volatility
Caterpillar historical daily return volatility represents how much of Caterpillar stock's daily returns swing around its mean - it is a statistical measure of its dispersion of returns. The firm has volatility of 1.9457% on return distribution over 90 days investment horizon. By contrast, Dow Jones Industrial accepts 0.7762% volatility on return distribution over the 90 days horizon. Performance |
| Timeline |
About Caterpillar Volatility
Volatility is a rate at which the price of Caterpillar or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Caterpillar may increase or decrease. In other words, similar to Caterpillar's beta indicator, it measures the risk of Caterpillar and helps estimate the fluctuations that may happen in a short period of time. So if prices of Caterpillar fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility.
Please read more on our technical analysis page.Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company was founded in 1925 and is headquartered in Deerfield, Illinois. Caterpillar operates under Farm Heavy Construction Machinery classification in the United States and is traded on New York Stock Exchange. It employs 107700 people.
Caterpillar's stock volatility refers to the amount of uncertainty or risk involved with the size of changes in its stock's price. It is a statistical measure of the dispersion of returns on Caterpillar Stock over a specified period of time, often expressed as the standard deviation of daily returns. In other words, it measures how much Caterpillar's price varies over time.
3 ways to utilize Caterpillar's volatility to invest better
Higher Caterpillar's stock volatility means that the price of its stock is changing rapidly and unpredictably, while lower stock volatility indicates that the price of Caterpillar stock is relatively stable. Investors and traders use stock volatility as an indicator of risk and potential reward, as stocks with higher volatility can offer the potential for more significant returns but also come with a greater risk of losses. Caterpillar stock volatility can provide helpful information for making investment decisions in the following ways:- Measuring Risk: Volatility can be used as a measure of risk, which can help you determine the potential fluctuations in the value of Caterpillar investment. A higher volatility means higher risk and potentially larger changes in value.
- Identifying Opportunities: High volatility in Caterpillar's stock can indicate that there is potential for significant price movements, either up or down, which could present investment opportunities.
- Diversification: Understanding how the volatility of Caterpillar's stock relates to your other investments can help you create a well-diversified portfolio of assets with varying levels of risk.
Caterpillar Investment Opportunity
Caterpillar has a volatility of 1.95 and is 2.5 times more volatile than Dow Jones Industrial. 17 percent of all equities and portfolios are less risky than Caterpillar. You can use Caterpillar to enhance the returns of your portfolios. The stock experiences an unexpected upward trend. Watch out for market signals. Check odds of Caterpillar to be traded at $486.78 in 90 days.Poor diversification
The correlation between Caterpillar and DJI is 0.74 (i.e., Poor diversification) for selected investment horizon. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and DJI in the same portfolio, assuming nothing else is changed.
Caterpillar Additional Risk Indicators
The analysis of Caterpillar's secondary risk indicators is one of the essential steps in making a buy or sell decision. The process involves identifying the amount of risk involved in Caterpillar's investment and either accepting that risk or mitigating it. Along with some common measures of Caterpillar stock's risk such as standard deviation, beta, or value at risk, we also provide a set of secondary indicators that can assist in the individual investment decision or help in hedging the risk of your existing portfolios.
| Risk Adjusted Performance | 0.1055 | |||
| Market Risk Adjusted Performance | 0.1383 | |||
| Mean Deviation | 1.32 | |||
| Semi Deviation | 1.35 | |||
| Downside Deviation | 1.64 | |||
| Coefficient Of Variation | 770.8 | |||
| Standard Deviation | 1.93 |
Please note, the risk measures we provide can be used independently or collectively to perform a risk assessment. When comparing two potential stocks, we recommend comparing similar stocks with homogenous growth potential and valuation from related markets to determine which investment holds the most risk.
Caterpillar Suggested Diversification Pairs
Pair trading is one of the very effective strategies used by professional day traders and hedge funds capitalizing on short-time and mid-term market inefficiencies. The approach is based on the fact that the ratio of prices of two correlating shares is long-term stable and oscillates around the average value. If the correlation ratio comes outside the common area, you can speculate with a high success rate that the ratio will return to the mean value and collect a profit.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Caterpillar as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Caterpillar's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Caterpillar's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Caterpillar.
Additional Tools for Caterpillar Stock Analysis
When running Caterpillar's price analysis, check to measure Caterpillar's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Caterpillar is operating at the current time. Most of Caterpillar's value examination focuses on studying past and present price action to predict the probability of Caterpillar's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Caterpillar's price. Additionally, you may evaluate how the addition of Caterpillar to your portfolios can decrease your overall portfolio volatility.