Correlation Between ProShares UltraShort and MicroSectors Gold
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and MicroSectors Gold 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 ProShares UltraShort and MicroSectors Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Basic and MicroSectors Gold 3X, you can compare the effects of market volatilities on ProShares UltraShort and MicroSectors Gold 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 ProShares UltraShort with a short position of MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and MicroSectors Gold.
Diversification Opportunities for ProShares UltraShort and MicroSectors Gold
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ProShares and MicroSectors is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Basic and MicroSectors Gold 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold and ProShares UltraShort 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 ProShares UltraShort Basic are associated (or correlated) with MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and MicroSectors Gold go up and down completely randomly.
Pair Corralation between ProShares UltraShort and MicroSectors Gold
Considering the 90-day investment horizon ProShares UltraShort Basic is expected to generate 0.69 times more return on investment than MicroSectors Gold. However, ProShares UltraShort Basic is 1.45 times less risky than MicroSectors Gold. It trades about -0.04 of its potential returns per unit of risk. MicroSectors Gold 3X is currently generating about -0.08 per unit of risk. If you would invest 1,866 in ProShares UltraShort Basic on August 31, 2024 and sell it today you would lose (512.00) from holding ProShares UltraShort Basic or give up 27.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
ProShares UltraShort Basic vs. MicroSectors Gold 3X
Performance |
| Timeline |
| ProShares UltraShort |
| MicroSectors Gold |
ProShares UltraShort and MicroSectors Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and MicroSectors Gold
The main advantage of trading using opposite ProShares UltraShort and MicroSectors Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, MicroSectors Gold 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 MicroSectors Gold will offset losses from the drop in MicroSectors Gold's long position.The idea behind ProShares UltraShort Basic and MicroSectors Gold 3X 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.
| MicroSectors Gold vs. Microsectors Gold 3x | MicroSectors Gold vs. Direxion Daily 7 10 | MicroSectors Gold vs. Direxion Daily SP | MicroSectors Gold vs. Direxion Daily FTSE |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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