Correlation Between ProShares UltraShort and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Chevron Corp 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 Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Bloomberg and Chevron Corp, you can compare the effects of market volatilities on ProShares UltraShort and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Chevron Corp.
Diversification Opportunities for ProShares UltraShort and Chevron Corp
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ProShares and Chevron is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Bloomberg are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Chevron Corp go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Chevron Corp
Given the investment horizon of 90 days ProShares UltraShort Bloomberg is expected to generate 14.78 times more return on investment than Chevron Corp. However, ProShares UltraShort is 14.78 times more volatile than Chevron Corp. It trades about 0.11 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.19 per unit of risk. If you would invest 4,687 in ProShares UltraShort Bloomberg on January 24, 2024 and sell it today you would earn a total of 2,532 from holding ProShares UltraShort Bloomberg or generate 54.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. Chevron Corp
Performance |
| Timeline |
| ProShares UltraShort |
| Chevron Corp |
ProShares UltraShort and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Chevron Corp
The main advantage of trading using opposite ProShares UltraShort and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.The idea behind ProShares UltraShort Bloomberg and Chevron Corp 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.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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