Correlation Between MicroSectorsTM Oil and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both MicroSectorsTM Oil 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 MicroSectorsTM Oil and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectorsTM Oil Gas and ProShares UltraShort Silver, you can compare the effects of market volatilities on MicroSectorsTM Oil 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 MicroSectorsTM Oil with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectorsTM Oil and ProShares UltraShort.
Diversification Opportunities for MicroSectorsTM Oil and ProShares UltraShort
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MicroSectorsTM and ProShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectorsTM Oil Gas and ProShares UltraShort Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and MicroSectorsTM Oil 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 MicroSectorsTM Oil Gas 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 MicroSectorsTM Oil i.e., MicroSectorsTM Oil and ProShares UltraShort go up and down completely randomly.
Pair Corralation between MicroSectorsTM Oil and ProShares UltraShort
Given the investment horizon of 90 days MicroSectorsTM Oil Gas is expected to generate 1.46 times more return on investment than ProShares UltraShort. However, MicroSectorsTM Oil is 1.46 times more volatile than ProShares UltraShort Silver. It trades about -0.02 of its potential returns per unit of risk. ProShares UltraShort Silver is currently generating about -0.03 per unit of risk. If you would invest 4,300 in MicroSectorsTM Oil Gas on January 20, 2024 and sell it today you would lose (2,865) from holding MicroSectorsTM Oil Gas or give up 66.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
MicroSectorsTM Oil Gas vs. ProShares UltraShort Silver
Performance |
| Timeline |
| MicroSectorsTM Oil Gas |
| ProShares UltraShort |
MicroSectorsTM Oil and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectorsTM Oil and ProShares UltraShort
The main advantage of trading using opposite MicroSectorsTM Oil and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectorsTM Oil 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.| MicroSectorsTM Oil vs. MicroSectorsTM Oil Gas | MicroSectorsTM Oil vs. MicroSectors Big Oil | MicroSectorsTM Oil vs. UBS ETRACS | MicroSectorsTM Oil vs. Drum Income Plus |
| ProShares UltraShort vs. ProShares UltraShort Gold | ProShares UltraShort vs. ProShares Ultra Silver | ProShares UltraShort vs. DB Gold Double | ProShares UltraShort vs. ProShares Ultra Gold |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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