Correlation Between Coca Cola and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and ProShares Ultra MSCI, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and ProShares Ultra.
Diversification Opportunities for Coca Cola and ProShares Ultra
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coca and ProShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and ProShares Ultra MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra MSCI and Coca Cola 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 The Coca Cola 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 MSCI has no effect on the direction of Coca Cola i.e., Coca Cola and ProShares Ultra go up and down completely randomly.
Pair Corralation between Coca Cola and ProShares Ultra
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.06 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, The Coca Cola is 3.61 times less risky than ProShares Ultra. It trades about 0.02 of its potential returns per unit of risk. ProShares Ultra MSCI is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,237 in ProShares Ultra MSCI on August 25, 2024 and sell it today you would lose (288.00) from holding ProShares Ultra MSCI or give up 12.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. ProShares Ultra MSCI
Performance |
| Timeline |
| Coca Cola |
| ProShares Ultra MSCI |
Coca Cola and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and ProShares Ultra
The main advantage of trading using opposite Coca Cola and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 The Coca Cola and ProShares Ultra MSCI 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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