Correlation Between Microsoft and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Microsoft and ProShares Short 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 Microsoft and ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ProShares Short High, you can compare the effects of market volatilities on Microsoft and ProShares Short 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 Microsoft with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ProShares Short.
Diversification Opportunities for Microsoft and ProShares Short
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and ProShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ProShares Short High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short High and Microsoft 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 Microsoft are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short High has no effect on the direction of Microsoft i.e., Microsoft and ProShares Short go up and down completely randomly.
Pair Corralation between Microsoft and ProShares Short
Given the investment horizon of 90 days Microsoft is expected to generate 4.98 times more return on investment than ProShares Short. However, Microsoft is 4.98 times more volatile than ProShares Short High. It trades about 0.02 of its potential returns per unit of risk. ProShares Short High is currently generating about -0.09 per unit of risk. If you would invest 41,195 in Microsoft on August 31, 2024 and sell it today you would earn a total of 1,151 from holding Microsoft or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ProShares Short High
Performance |
| Timeline |
| Microsoft |
| ProShares Short High |
Microsoft and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ProShares Short
The main advantage of trading using opposite Microsoft and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| ProShares Short vs. ProShares UltraShort 20 | ProShares Short vs. Direxion Daily 20 | ProShares Short vs. ProShares Short 20 | ProShares Short vs. ProShares UltraShort 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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