Correlation Between ProShares UltraShort and Walmart

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Walmart 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 Walmart 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 Walmart, you can compare the effects of market volatilities on ProShares UltraShort and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Walmart.

Diversification Opportunities for ProShares UltraShort and Walmart

-0.74

Correlation Coefficient

ProShares UltraShort  Walmart

Pay attention - limited upside

The 3 months correlation between ProShares and Walmart is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Walmart go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Walmart

Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to generate 1.87 times more return on investment than Walmart. However, ProShares UltraShort is 1.87 times more volatile than Walmart. It trades about 0.19 of its potential returns per unit of risk. Walmart is currently generating about -0.06 per unit of risk. If you would invest  2,525  in ProShares UltraShort SP500 on January 26, 2024 and sell it today you would earn a total of  155.00  from holding ProShares UltraShort SP500 or generate 6.14% return on investment over 90 days.

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

ProShares UltraShort SP500  vs.  Walmart

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ProShares UltraShort and Walmart

The main advantage of trading using opposite ProShares UltraShort and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.

The idea behind ProShares UltraShort SP500 and Walmart 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.