Can any of the company-specific risk be diversified away by investing in both MicroSectors Big 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 MicroSectors Big and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors Big Banks and ProShares UltraShort MSCI, you can compare the effects of market volatilities on MicroSectors Big 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 MicroSectors Big with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Big and ProShares UltraShort.
Diversification Opportunities for MicroSectors Big and ProShares UltraShort
The 3 months correlation between MicroSectors and ProShares is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Big Banks and ProShares UltraShort MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort MSCI and MicroSectors Big 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 MicroSectors Big Banks 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 MSCI has no effect on the direction of MicroSectors Big i.e., MicroSectors Big and ProShares UltraShort go up and down completely randomly.
Pair Corralation between MicroSectors Big and ProShares UltraShort
Given the investment horizon of 90 days MicroSectors Big Banks is expected to generate 1.81 times more return on investment than ProShares UltraShort. However, MicroSectors Big is 1.81 times more volatile than ProShares UltraShort MSCI. It trades about 0.06 of its potential returns per unit of risk. ProShares UltraShort MSCI is currently generating about -0.05 per unit of risk. If you would invest 2,885 in MicroSectors Big Banks on March 5, 2024 and sell it today you would earn a total of 162.00 from holding MicroSectors Big Banks or generate 5.62% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Big Banks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, MicroSectors Big unveiled solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days ProShares UltraShort MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.