Correlation Between Alcoa Corp and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and ProShares Ultra 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 Alcoa Corp and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and ProShares Ultra Nasdaq, you can compare the effects of market volatilities on Alcoa Corp and ProShares Ultra 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 Alcoa Corp with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and ProShares Ultra.
Diversification Opportunities for Alcoa Corp and ProShares Ultra
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and ProShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ProShares Ultra Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Nasdaq and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra Nasdaq has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ProShares Ultra go up and down completely randomly.
Pair Corralation between Alcoa Corp and ProShares Ultra
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.28 times more return on investment than ProShares Ultra. However, Alcoa Corp is 1.28 times more volatile than ProShares Ultra Nasdaq. It trades about 0.2 of its potential returns per unit of risk. ProShares Ultra Nasdaq is currently generating about 0.14 per unit of risk. If you would invest 3,592 in Alcoa Corp on August 26, 2024 and sell it today you would earn a total of 955.00 from holding Alcoa Corp or generate 26.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. ProShares Ultra Nasdaq
Performance |
| Timeline |
| Alcoa Corp |
| ProShares Ultra Nasdaq |
Alcoa Corp and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and ProShares Ultra
The main advantage of trading using opposite Alcoa Corp and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, ProShares Ultra 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 Ultra will offset losses from the drop in ProShares Ultra's long position.The idea behind Alcoa Corp and ProShares Ultra Nasdaq 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.| ProShares Ultra vs. Direxion Daily SP | ProShares Ultra vs. Direxion Daily Semiconductor | ProShares Ultra vs. Direxion Daily Semiconductor |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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