Correlation Between Citigroup and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and ProShares Ultra SmallCap600, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and ProShares Ultra.
Diversification Opportunities for Citigroup and ProShares Ultra
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and ProShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ProShares Ultra SmallCap600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Smal and Citigroup 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 Citigroup 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 Smal has no effect on the direction of Citigroup i.e., Citigroup and ProShares Ultra go up and down completely randomly.
Pair Corralation between Citigroup and ProShares Ultra
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.72 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, Citigroup is 1.67 times less risky than ProShares Ultra. It trades about 0.21 of its potential returns per unit of risk. ProShares Ultra SmallCap600 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,667 in ProShares Ultra SmallCap600 on August 29, 2024 and sell it today you would earn a total of 445.00 from holding ProShares Ultra SmallCap600 or generate 16.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. ProShares Ultra SmallCap600
Performance |
| Timeline |
| Citigroup |
| ProShares Ultra Smal |
Citigroup and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and ProShares Ultra
The main advantage of trading using opposite Citigroup and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup and ProShares Ultra SmallCap600 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. ProShares Ultra MidCap400 | ProShares Ultra vs. ProShares Ultra Industrials | ProShares Ultra vs. ProShares Ultra Consumer | ProShares Ultra vs. ProShares Ultra Consumer |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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