Correlation Between Ally Financial and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Ally Financial 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 Ally Financial and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and ProShares UltraShort SP500, you can compare the effects of market volatilities on Ally Financial 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 Ally Financial with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and ProShares UltraShort.
Diversification Opportunities for Ally Financial and ProShares UltraShort
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ally and ProShares is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Ally Financial 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 Ally Financial 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 Ally Financial i.e., Ally Financial and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Ally Financial and ProShares UltraShort
Given the investment horizon of 90 days Ally Financial is expected to generate 1.5 times more return on investment than ProShares UltraShort. However, Ally Financial is 1.5 times more volatile than ProShares UltraShort SP500. It trades about 0.1 of its potential returns per unit of risk. ProShares UltraShort SP500 is currently generating about -0.12 per unit of risk. If you would invest 3,229 in Ally Financial on January 17, 2024 and sell it today you would earn a total of 430.00 from holding Ally Financial or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Ally Financial vs. ProShares UltraShort SP500
Performance |
| Timeline |
| Ally Financial |
| ProShares UltraShort |
Ally Financial and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and ProShares UltraShort
The main advantage of trading using opposite Ally Financial and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial 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 Ally Financial and ProShares UltraShort SP500 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.| ProShares UltraShort vs. ProShares UltraShort QQQ | ProShares UltraShort vs. ProShares UltraShort Dow30 | ProShares UltraShort vs. ProShares Ultra SP500 | ProShares UltraShort vs. ProShares Short SP500 |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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