Correlation Between Financial Select and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Financial Select 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 Financial Select and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and ProShares UltraShort Silver, you can compare the effects of market volatilities on Financial Select 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 Financial Select with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and ProShares UltraShort.
Diversification Opportunities for Financial Select and ProShares UltraShort
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Financial and ProShares is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and ProShares UltraShort Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Financial Select 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 Financial Select Sector 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 Financial Select i.e., Financial Select and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Financial Select and ProShares UltraShort
Considering the 90-day investment horizon Financial Select Sector is expected to generate 0.23 times more return on investment than ProShares UltraShort. However, Financial Select Sector is 4.32 times less risky than ProShares UltraShort. It trades about 0.15 of its potential returns per unit of risk. ProShares UltraShort Silver is currently generating about -0.04 per unit of risk. If you would invest 3,314 in Financial Select Sector on August 28, 2024 and sell it today you would earn a total of 1,792 from holding Financial Select Sector or generate 54.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Select Sector vs. ProShares UltraShort Silver
Performance |
| Timeline |
| Financial Select Sector |
| ProShares UltraShort |
Financial Select and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and ProShares UltraShort
The main advantage of trading using opposite Financial Select and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select 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.| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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