Correlation Between GoPro and ProShares UltraShort

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Can any of the company-specific risk be diversified away by investing in both GoPro 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 GoPro and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoPro Inc and ProShares UltraShort SmallCap600, you can compare the effects of market volatilities on GoPro 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 GoPro with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoPro and ProShares UltraShort.

Diversification Opportunities for GoPro and ProShares UltraShort

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between GoPro and ProShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding GoPro Inc and ProShares UltraShort SmallCap6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and GoPro 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 GoPro Inc 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 GoPro i.e., GoPro and ProShares UltraShort go up and down completely randomly.

Pair Corralation between GoPro and ProShares UltraShort

Given the investment horizon of 90 days GoPro Inc is expected to generate 1.61 times more return on investment than ProShares UltraShort. However, GoPro is 1.61 times more volatile than ProShares UltraShort SmallCap600. It trades about -0.01 of its potential returns per unit of risk. ProShares UltraShort SmallCap600 is currently generating about -0.1 per unit of risk. If you would invest  226.00  in GoPro Inc on December 29, 2023 and sell it today you would lose (3.00) from holding GoPro Inc or give up 1.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GoPro Inc  vs.  ProShares UltraShort SmallCap6

 Performance 
       Timeline  
GoPro Inc 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
ProShares UltraShort 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days ProShares UltraShort SmallCap600 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

GoPro and ProShares UltraShort Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GoPro and ProShares UltraShort

The main advantage of trading using opposite GoPro and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoPro 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 GoPro Inc 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.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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