Correlation Between Ford and ProShares UltraPro
Can any of the company-specific risk be diversified away by investing in both Ford and ProShares UltraPro 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 Ford and ProShares UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ProShares UltraPro Short, you can compare the effects of market volatilities on Ford and ProShares UltraPro 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 Ford with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ProShares UltraPro.
Diversification Opportunities for Ford and ProShares UltraPro
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and ProShares is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short and Ford 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 Ford Motor are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Short has no effect on the direction of Ford i.e., Ford and ProShares UltraPro go up and down completely randomly.
Pair Corralation between Ford and ProShares UltraPro
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.82 times more return on investment than ProShares UltraPro. However, Ford Motor is 1.22 times less risky than ProShares UltraPro. It trades about 0.04 of its potential returns per unit of risk. ProShares UltraPro Short is currently generating about -0.02 per unit of risk. If you would invest 911.00 in Ford Motor on August 26, 2024 and sell it today you would earn a total of 207.00 from holding Ford Motor or generate 22.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. ProShares UltraPro Short
Performance |
| Timeline |
| Ford Motor |
| ProShares UltraPro Short |
Ford and ProShares UltraPro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ProShares UltraPro
The main advantage of trading using opposite Ford and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, ProShares UltraPro 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 UltraPro will offset losses from the drop in ProShares UltraPro's long position.The idea behind Ford Motor and ProShares UltraPro Short 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 UltraPro vs. Direxion Daily 20 | ProShares UltraPro vs. Direxion Daily 7 10 | ProShares UltraPro vs. ProShares Short 20 | ProShares UltraPro vs. ProShares Short 7 10 |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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