Correlation Between American Express and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Express and ProShares UltraShort Utilities, you can compare the effects of market volatilities on American Express 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 American Express with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and ProShares UltraShort.

Diversification Opportunities for American Express and ProShares UltraShort

-0.61

Correlation Coefficient

American Express  ProShares UltraShort

Excellent diversification

The 3 months correlation between American and ProShares is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and American Express 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 American Express 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 American Express i.e., American Express and ProShares UltraShort go up and down completely randomly.

Pair Corralation between American Express and ProShares UltraShort

Considering the 90-day investment horizon American Express is expected to under-perform the ProShares UltraShort. But the stock apears to be less risky and, when comparing its historical volatility, American Express is 1.68 times less risky than ProShares UltraShort. The stock trades about -0.05 of its potential returns per unit of risk. The ProShares UltraShort Utilities is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,218  in ProShares UltraShort Utilities on January 19, 2024 and sell it today you would lose (8.00) from holding ProShares UltraShort Utilities or give up 0.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

American Express  vs.  ProShares UltraShort Utilities

American Express

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Etf's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with American Express and ProShares UltraShort

The main advantage of trading using opposite American Express and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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 American Express and ProShares UltraShort Utilities 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.

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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.