Correlation Between Meta Platforms and ProShares UltraShort

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Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and ProShares UltraShort SP500, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and ProShares UltraShort.

Diversification Opportunities for Meta Platforms and ProShares UltraShort

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Meta and ProShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Meta Platforms 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 Meta Platforms 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 Meta Platforms i.e., Meta Platforms and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Meta Platforms and ProShares UltraShort

Allowing for the 90-day total investment horizon Meta Platforms is expected to under-perform the ProShares UltraShort. In addition to that, Meta Platforms is 1.88 times more volatile than ProShares UltraShort SP500. It trades about -0.08 of its total potential returns per unit of risk. ProShares UltraShort SP500 is currently generating about -0.02 per unit of volatility. If you would invest  3,685  in ProShares UltraShort SP500 on December 30, 2023 and sell it today you would lose (1,199) from holding ProShares UltraShort SP500 or give up 32.54% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy10.93%
ValuesDaily Returns

Meta Platforms  vs.  ProShares UltraShort SP500

 Performance 
       Timeline  
Meta Platforms 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Meta Platforms is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
ProShares UltraShort 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ProShares UltraShort SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Meta Platforms and ProShares UltraShort Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meta Platforms and ProShares UltraShort

The main advantage of trading using opposite Meta Platforms and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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 Meta Platforms 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.
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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