Caterpillar Stock Volatility


USD 178.82  0.44  0.25%   

We consider Caterpillar very steady. Caterpillar secures Sharpe Ratio (or Efficiency) of 0.0077, which signifies that the company had 0.0077% of return per unit of risk over the last 3 months. Our standpoint towards foreseeing the volatility of a stock is to use all available market data together with stock-specific technical indicators that cannot be diversified away. We have found twenty-eight technical indicators for Caterpillar, which you can use to evaluate the future volatility of the firm. Please confirm Caterpillar Risk Adjusted Performance of 0.0399, mean deviation of 1.66, and Downside Deviation of 2.01 to double-check if the risk estimate we provide is consistent with the expected return of 0.0166%.
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.

30 Days Market Risk

Very steady

Chance of Distress

Below Average

30 Days Economic Sensitivity

Responds to the market
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

+0.64VOLAFVolvo AbPairCorr
+0.75VLVLYVolvo Ab ADRPairCorr
+0.73VOLVFVolvo Ab ClPairCorr
+0.8PCARPACCAR IncPairCorr
+0.79DTRUYDaimler Truck HldgPairCorr

Moving against Caterpillar

-0.59BMYMPBristol Myer SquiPairCorr

Caterpillar Market Sensitivity And Downside Risk

Caterpillar's beta coefficient measures the volatility of Caterpillar stock compared to the systematic risk of the entire stock 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 1.44 provides an investor with an approximation of how much risk Caterpillar stock can potentially add to one of your existing portfolios.
Caterpillar currently demonstrates below-average downside deviation. It has Information Ratio of 0.04 and Jensen Alpha of 0.11. However, we advise investors to further question Caterpillar expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk. 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 stocks as prices fall.
3 Months Beta |Analyze Caterpillar Demand Trend
Check current 90 days Caterpillar correlation with market (DOW)

Caterpillar Beta

Caterpillar standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. Typical volatile equity 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

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.

Using Caterpillar Put Option to Manage Risk

Put options written on Caterpillar grant holders of the option the right to sell a specified amount of Caterpillar at a specified price within a specified time frame. The put buyer has a limited loss and, while not fully unlimited gains, as the price of Caterpillar Stock cannot fall below zero, the put buyer does gain as the price drops. So, one way investors can hedge Caterpillar's position is by buying a put option against it. The put option used this way is usually referred to as insurance. If an undesired outcome occurs and loss on holding Caterpillar will be realized, the loss incurred will be offset by the profits made with the option trade.

Caterpillar's PUT expiring on 2022-10-07

       Caterpillar Price At Expiration  

Current Caterpillar Insurance Chain

DeltaGammaOpen IntExpirationCurrent SpreadLast Price
2022-10-07 PUT at $200.0-0.97630.005842022-10-0720.05 - 20.8535.86View
2022-10-07 PUT at $195.0-0.86690.0167192022-10-0714.5 - 16.229.96View
2022-10-07 PUT at $190.0-0.95480.0161352022-10-0710.05 - 10.911.48View
2022-10-07 PUT at $187.5-0.94760.0227112022-10-077.45 - 8.457.97View
2022-10-07 PUT at $185.0-0.80480.0457882022-10-075.3 - 6.256.01View
2022-10-07 PUT at $182.5-0.6740.05931142022-10-073.85 - 4.34.14View
2022-10-07 PUT at $180.0-0.51680.06468852022-10-072.52 - 2.732.65View
2022-10-07 PUT at $177.5-0.36110.059822022-10-071.52 - 1.671.72View
2022-10-07 PUT at $175.0-0.23760.04585402022-10-070.88 - 1.041.05View
2022-10-07 PUT at $172.5-0.15850.03264442022-10-070.52 - 0.630.63View
2022-10-07 PUT at $170.0-0.08850.02157292022-10-070.28 - 0.340.35View
View All Caterpillar Options

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.
The output start index for this execution was zero with a total number of output elements of sixty-one. The Median Price line plots median indexes of Caterpillar price series.

Caterpillar Projected Return Density Against Market

Considering the 90-day investment horizon the stock has the beta coefficient of 1.4422 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 Industrials 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.
The company has an alpha of 0.1068, implying that it can generate a 0.11 percent excess return over DOW after adjusting for the inherited market risk (beta).
   Predicted Return Density   
Caterpillar's volatility is measured either by using standard deviation or beta. Standard deviation will reflect the average amount of how caterpillar stock's price will differ from the mean after some time.To get its calculation, you should first determine the mean price during the specified period then subtract that from each price point.

What Drives a Caterpillar Price Volatility?

Several factors can influence a Stock's stock volatility:


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

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 Industrials 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. Considering the 90-day investment horizon the coefficient of variation of Caterpillar is 13016.12. The daily returns are distributed with a variance of 4.65 and standard deviation of 2.16. The mean deviation of Caterpillar is currently at 1.61. For similar time horizon, the selected benchmark (DOW) has volatility of 1.23
Alpha over DOW
Beta against DOW1.44
Overall volatility
Information ratio 0.0411

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 2.157% on return distribution over 90 days investment horizon. By contrast, DOW inherits 1.241% risk (volatility on return distribution) over the 90 days horizon.
 Performance (%) 

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 worldwide. 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 Investment Opportunity

Caterpillar has a volatility of 2.16 and is 1.74 times more volatile than DOW. 18  of all equities and portfolios are less risky than Caterpillar. Compared to the overall equity markets, volatility of historical daily returns of Caterpillar is lower than 18 () of all global equities and portfolios over the last 90 days. Use Caterpillar to enhance the returns of your portfolios. Benchmarks are essential to demonstrate the utility of optimization algorithms. The stock experiences a normal upward fluctuation. Check odds of Caterpillar to be traded at $187.76 in 90 days.

Very poor diversification

The correlation between Caterpillar and DJI is 0.8 (i.e., Very 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.
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.
Continue to Trending Equities. Note that the Caterpillar information on this page should be used as a complementary analysis to other Caterpillar's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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Is Caterpillar's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Caterpillar. If investors know Caterpillar will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Caterpillar listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Caterpillar is measured differently than its book value, which is the value of Caterpillar that is recorded on the company's balance sheet. Investors also form their own opinion of Caterpillar's value that differs from its market value or its book value, called intrinsic value, which is Caterpillar's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Caterpillar's market value can be influenced by many factors that don't directly affect Caterpillar's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Caterpillar's value and its price as these two are different measures arrived at by different means. Investors typically determine Caterpillar value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Caterpillar's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.