Correlation Between GoPro and ProShares UltraShort
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
GoPro Inc vs. ProShares UltraShort SmallCap6
Performance |
Timeline |
GoPro Inc |
ProShares UltraShort |
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.ProShares UltraShort vs. Davis Select International | ProShares UltraShort vs. Dimensional ETF Trust | ProShares UltraShort vs. Principal Value ETF | ProShares UltraShort vs. Vanguard Small Cap Index |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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