Correlation Between ProShares UltraShort and 3M
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and 3M 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 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SP500 and 3M Company, you can compare the effects of market volatilities on ProShares UltraShort and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and 3M.
Diversification Opportunities for ProShares UltraShort and 3M
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ProShares and 3M is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 SP500 are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and 3M go up and down completely randomly.
Pair Corralation between ProShares UltraShort and 3M
Considering the 90-day investment horizon ProShares UltraShort is expected to generate 1.23 times less return on investment than 3M. But when comparing it to its historical volatility, ProShares UltraShort SP500 is 1.13 times less risky than 3M. It trades about 0.19 of its potential returns per unit of risk. 3M Company is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 8,581 in 3M Company on January 26, 2024 and sell it today you would earn a total of 621.00 from holding 3M Company or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
ProShares UltraShort SP500 vs. 3M Company
Performance |
| Timeline |
| ProShares UltraShort |
| 3M Company |
ProShares UltraShort and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and 3M
The main advantage of trading using opposite ProShares UltraShort and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.The idea behind ProShares UltraShort SP500 and 3M Company 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.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |