When the dollar is falling, here are the stocks that work

Key Points
  • The best performing stocks on average when the dollar falls 10 percent against the euro in six months during the last decade include Caterpillar and Goldman Sachs, according to Kensho.
  • Credit Suisse also recommends stocks in the materials sector during time periods of dollar weakness due to the industry's high international sales exposure.
Trading the dollar decline
Trading the dollar decline

With the dollar tumbling against the euro this year, many on Wall Street are predicting the U.S. currency may weaken even further from here. Investors can trade the trend, using history as a guide.

The euro surged 1.8 percent this week against the dollar through Friday because European Central Bank President Mario Draghi said the central bank will discuss the potential end of its asset-purchase program in September. The European currency is now up nearly 10 percent year-to-date relative to the greenback.

Credit Suisse's Lori Calvasina told clients Thursday the materials and consumer staples sectors have the "most to gain" from a weaker US dollar.

"Materials ... and large cap household and personal products (which has ranked high on our large cap industry group scorecard) stand out as likely beneficiaries of a weaker dollar," she wrote. "For both, earnings revisions and relative performance trends have been inversely correlated to the dollar, and they both have high international revenue exposure."

Using Kensho, CNBC screened for the best-performing stocks and sectors in the hypothetical scenario of continued dollar weakness. It looked at companies in the Dow Jones industrial average and sector ETFs when the dollar declined by 10 percent against the euro in six months during the last decade.

Source: Kensho

In terms of sectors, the best performing stocks on average when the dollar fell 10 percent against the euro were in the materials space, according to Kensho. The results confirmed Credit Suisse's recommendation of the industry.

A look at the returns of specific companies:

Source: Kensho

Multinational companies benefit from a weaker dollar as such currency moves improve sales and earnings when products or services are sold in international markets.

Consequently Caterpillar shares rose 17.6 percent on average when the dollar fell 10 percent against the euro in six months, according to Kensho. The construction and mining equipment manufacturer receives more than half of its sales from overseas, according to FactSet.

Goldman Sachs also outperformed with a 35.2 percent return on average in the same time periods. The financial services firm generates nearly 60 percent of its sales from international markets.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.


WATCH: Dollar depression not over

Dollar depression isn't over
Dollar depression isn't over