Correlation Between MicroSectors Gold and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both MicroSectors Gold and ProShares UltraShort 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 MicroSectors Gold and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors Gold Miners and ProShares UltraShort Silver, you can compare the effects of market volatilities on MicroSectors Gold and ProShares UltraShort 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 MicroSectors Gold with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Gold and ProShares UltraShort.
Diversification Opportunities for MicroSectors Gold and ProShares UltraShort
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MicroSectors and ProShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold Miners and ProShares UltraShort Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and MicroSectors Gold 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 MicroSectors Gold Miners are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of MicroSectors Gold i.e., MicroSectors Gold and ProShares UltraShort go up and down completely randomly.
Pair Corralation between MicroSectors Gold and ProShares UltraShort
Given the investment horizon of 90 days MicroSectors Gold Miners is expected to under-perform the ProShares UltraShort. In addition to that, MicroSectors Gold is 1.6 times more volatile than ProShares UltraShort Silver. It trades about -0.04 of its total potential returns per unit of risk. ProShares UltraShort Silver is currently generating about -0.04 per unit of volatility. If you would invest 7,972 in ProShares UltraShort Silver on August 28, 2024 and sell it today you would lose (4,067) from holding ProShares UltraShort Silver or give up 51.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors Gold Miners vs. ProShares UltraShort Silver
Performance |
| Timeline |
| MicroSectors Gold Miners |
| ProShares UltraShort |
MicroSectors Gold and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors Gold and ProShares UltraShort
The main advantage of trading using opposite MicroSectors Gold and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Gold position performs unexpectedly, ProShares UltraShort 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 UltraShort will offset losses from the drop in ProShares UltraShort's long position.The idea behind MicroSectors Gold Miners and ProShares UltraShort Silver 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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