Correlation Between HP and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and ProShares Ultra Oil, you can compare the effects of market volatilities on HP 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 HP with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and ProShares Ultra.
Diversification Opportunities for HP and ProShares Ultra
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and ProShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and ProShares Ultra Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Oil and HP 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 HP Inc 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 Oil has no effect on the direction of HP i.e., HP and ProShares Ultra go up and down completely randomly.
Pair Corralation between HP and ProShares Ultra
Considering the 90-day investment horizon HP Inc is expected to generate 0.91 times more return on investment than ProShares Ultra. However, HP Inc is 1.1 times less risky than ProShares Ultra. It trades about 0.09 of its potential returns per unit of risk. ProShares Ultra Oil is currently generating about 0.06 per unit of risk. If you would invest 2,763 in HP Inc on August 27, 2024 and sell it today you would earn a total of 1,050 from holding HP Inc or generate 38.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. ProShares Ultra Oil
Performance |
| Timeline |
| HP Inc |
| ProShares Ultra Oil |
HP and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and ProShares Ultra
The main advantage of trading using opposite HP and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc and ProShares Ultra Oil 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 UltraShort Oil | ProShares Ultra vs. ProShares Ultra Basic | ProShares Ultra vs. ProShares Ultra Financials | ProShares Ultra vs. ProShares Ultra Real |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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