Correlation Between Microsoft and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ProShares UltraShort SP500, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ProShares UltraShort.
Diversification Opportunities for Microsoft and ProShares UltraShort
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and ProShares is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Microsoft and ProShares UltraShort
Given the investment horizon of 90 days Microsoft is expected to under-perform the ProShares UltraShort. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.47 times less risky than ProShares UltraShort. The stock trades about -0.15 of its potential returns per unit of risk. The ProShares UltraShort SP500 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,512 in ProShares UltraShort SP500 on January 25, 2024 and sell it today you would earn a total of 168.00 from holding ProShares UltraShort SP500 or generate 6.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. ProShares UltraShort SP500
Performance |
| Timeline |
| Microsoft |
| ProShares UltraShort |
Microsoft and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ProShares UltraShort
The main advantage of trading using opposite Microsoft and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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