Correlation Between ProShares UltraShort and MicroSectorsTM Oil
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and MicroSectorsTM Oil 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 ProShares UltraShort and MicroSectorsTM Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Gold and MicroSectorsTM Oil Gas, you can compare the effects of market volatilities on ProShares UltraShort and MicroSectorsTM Oil 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 ProShares UltraShort with a short position of MicroSectorsTM Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and MicroSectorsTM Oil.
Diversification Opportunities for ProShares UltraShort and MicroSectorsTM Oil
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ProShares and MicroSectorsTM is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Gold and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas and ProShares UltraShort 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 ProShares UltraShort Gold are associated (or correlated) with MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and MicroSectorsTM Oil go up and down completely randomly.
Pair Corralation between ProShares UltraShort and MicroSectorsTM Oil
Considering the 90-day investment horizon ProShares UltraShort Gold is expected to generate 0.63 times more return on investment than MicroSectorsTM Oil. However, ProShares UltraShort Gold is 1.58 times less risky than MicroSectorsTM Oil. It trades about -0.25 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.19 per unit of risk. If you would invest 2,788 in ProShares UltraShort Gold on February 12, 2024 and sell it today you would lose (706.00) from holding ProShares UltraShort Gold or give up 25.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Gold vs. MicroSectorsTM Oil Gas
Performance |
| Timeline |
| ProShares UltraShort Gold |
| MicroSectorsTM Oil Gas |
ProShares UltraShort and MicroSectorsTM Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and MicroSectorsTM Oil
The main advantage of trading using opposite ProShares UltraShort and MicroSectorsTM Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, MicroSectorsTM Oil 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 MicroSectorsTM Oil will offset losses from the drop in MicroSectorsTM Oil's long position.| ProShares UltraShort vs. ProShares UltraShort Silver | ProShares UltraShort vs. MicroSectors Gold Miners | ProShares UltraShort vs. UBS ETRACS | ProShares UltraShort vs. DB Gold Short |
| MicroSectorsTM Oil vs. Direxion Daily SP | MicroSectorsTM Oil vs. Direxion Daily SP | MicroSectorsTM Oil vs. ProShares Short Dow30 |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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