Correlation Between Altra Industrial and ProShares UltraShort

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Can any of the company-specific risk be diversified away by investing in both Altra Industrial and ProShares UltraShort 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 Altra Industrial and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altra Industrial Motion and ProShares UltraShort Bloomberg, you can compare the effects of market volatilities on Altra Industrial and ProShares UltraShort 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 Altra Industrial with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altra Industrial and ProShares UltraShort.

Diversification Opportunities for Altra Industrial and ProShares UltraShort

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Altra and ProShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Altra Industrial Motion and ProShares UltraShort Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Altra Industrial 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 Altra Industrial Motion are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Altra Industrial i.e., Altra Industrial and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Altra Industrial and ProShares UltraShort

If you would invest  7,919  in ProShares UltraShort Bloomberg on December 30, 2023 and sell it today you would earn a total of  7,751  from holding ProShares UltraShort Bloomberg or generate 97.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy0.4%
ValuesDaily Returns

Altra Industrial Motion  vs.  ProShares UltraShort Bloomberg

 Performance 
       Timeline  
Altra Industrial Motion 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Altra Industrial Motion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Altra Industrial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
ProShares UltraShort 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Bloomberg are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, ProShares UltraShort exhibited solid returns over the last few months and may actually be approaching a breakup point.

Altra Industrial and ProShares UltraShort Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Altra Industrial and ProShares UltraShort

The main advantage of trading using opposite Altra Industrial and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altra Industrial position performs unexpectedly, ProShares UltraShort 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 UltraShort will offset losses from the drop in ProShares UltraShort's long position.
The idea behind Altra Industrial Motion and ProShares UltraShort Bloomberg pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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