Caterpillar (CAT) vs Industrial Sector (XLI): Correlation Analysis
Pearson correlation of daily returns for Caterpillar (CAT) and Industrials (XLI). Rolling windows, yearly breakdown, regression beta, and divergence analysis. Data window spans to (1,262 aligned observations).
What the Number Means
With a correlation of 0.84, Caterpillar (CAT) and Industrials (XLI) move together with remarkable consistency. A daily move in one is a reliable predictor of the direction of the other. This tight coupling usually reflects a common driver or a direct mechanical relationship.
Recent vs Long-Run Behavior
Recent correlation tracks the long-run relationship closely. No meaningful divergence. The historical pattern between Caterpillar (CAT) and Industrials (XLI) is intact and should continue to serve as a reasonable baseline for positioning.
Statistical Details (1-Year Window)
| Pearson Correlation (r) | +0.738 |
| R-Squared (r²) | 0.544 |
| Beta (Caterpillar (CAT) vs Industrials (XLI)) | 1.612 |
| Daily Volatility σ(Caterpillar (CAT)) | 2.06% |
| Daily Volatility σ(Industrials (XLI)) | 0.94% |
| Observations | 252 |
Correlation measures directional co-movement; R² quantifies the fraction of variance explained by the linear relationship. Beta is the slope coefficient from regressing Caterpillar (CAT) returns on Industrials (XLI) returns. A beta above 1 means the first asset amplifies moves of the second.
Year-by-Year Correlation
| Year | Correlation | Strength | Observations |
|---|---|---|---|
| 2026 | +0.845 | Very strong positive | 91 |
| 2025 | +0.757 | Strong positive | 250 |
| 2024 | +0.728 | Strong positive | 252 |
| 2023 | +0.704 | Strong positive | 250 |
| 2022 | +0.715 | Strong positive | 251 |
| 2021 | +0.761 | Strong positive | 168 |
Year-by-year correlation reveals how the relationship has held up across different macro regimes. Sharp year-over-year swings in correlation often mark the transition between stress and calm periods.
Rolling 90-Day Extremes
Extremes in rolling 90-day correlation often coincide with regime changes, forced deleveraging, or the arrival of a dominant new macro theme that overwhelms normal relationships.
Methodology
Correlations are computed on daily log-adjacent returns for Caterpillar (CAT) and Industrials (XLI), aligned on shared trading dates. We use the Pearson product-moment coefficient, which measures the linear relationship between two return series.
Windows are the most recent N observations for 30D, 90D, and 1Y (252 trading days); the 5Y figure uses all aligned data up to 1,260 observations. Beta is the OLS slope from regressing the first series on the second. Data updates daily with a 24-hour revalidation cadence.
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Get daily macro analysis on shifting correlations, regime transitions, and cross-asset signals.
Correlation is not causation and backward-looking statistics can fail when regimes shift. Positions sized on historical correlation assumptions should be stress-tested against scenarios where the relationship breaks. For informational purposes only.