Correlation Between ProShares Ultra and Alphabet

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Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Alphabet 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 Ultra and Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Ultra Semiconductors and Alphabet Class A, you can compare the effects of market volatilities on ProShares Ultra and Alphabet 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 Ultra with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Alphabet.

Diversification Opportunities for ProShares Ultra and Alphabet

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between ProShares and Alphabet is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A and ProShares Ultra 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 Ultra Semiconductors are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Alphabet go up and down completely randomly.

Pair Corralation between ProShares Ultra and Alphabet

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 2.4 times more return on investment than Alphabet. However, ProShares Ultra is 2.4 times more volatile than Alphabet Class A. It trades about 0.22 of its potential returns per unit of risk. Alphabet Class A is currently generating about -0.01 per unit of risk. If you would invest  6,721  in ProShares Ultra Semiconductors on December 29, 2023 and sell it today you would earn a total of  3,178  from holding ProShares Ultra Semiconductors or generate 47.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Ultra Semiconductors  vs.  Alphabet Class A

 Performance 
       Timeline  
ProShares Ultra Semi 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.
Alphabet Class A 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in April 2024.

ProShares Ultra and Alphabet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Ultra and Alphabet

The main advantage of trading using opposite ProShares Ultra and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.
The idea behind ProShares Ultra Semiconductors and Alphabet Class A 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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