Correlation Between Ford and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ProShares UltraShort SmallCap600, you can compare the effects of market volatilities on Ford 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 Ford with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ProShares UltraShort.
Diversification Opportunities for Ford and ProShares UltraShort
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and ProShares is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ProShares UltraShort SmallCap6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Ford 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 Ford Motor 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 Ford i.e., Ford and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Ford and ProShares UltraShort
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.85 times more return on investment than ProShares UltraShort. However, Ford Motor is 1.17 times less risky than ProShares UltraShort. It trades about 0.02 of its potential returns per unit of risk. ProShares UltraShort SmallCap600 is currently generating about -0.01 per unit of risk. If you would invest 1,118 in Ford Motor on January 19, 2024 and sell it today you would earn a total of 86.00 from holding Ford Motor or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. ProShares UltraShort SmallCap6
Performance |
| Timeline |
| Ford Motor |
| ProShares UltraShort |
Ford and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ProShares UltraShort
The main advantage of trading using opposite Ford and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and ProShares UltraShort SmallCap600 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 Ultra SP500 | ProShares UltraShort vs. HUMANA INC | ProShares UltraShort vs. Aquagold International | ProShares UltraShort vs. Thrivent High Yield |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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