Correlation Between Alcoa Corp and ProShares UltraPro

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and ProShares UltraPro 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 Alcoa Corp and ProShares UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and ProShares UltraPro Short, you can compare the effects of market volatilities on Alcoa Corp and ProShares UltraPro 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 Alcoa Corp with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and ProShares UltraPro.

Diversification Opportunities for Alcoa Corp and ProShares UltraPro

0.13

Correlation Coefficient

Alcoa Corp  ProShares UltraPro

Average diversification

The 3 months correlation between Alcoa and ProShares is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Short has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Alcoa Corp and ProShares UltraPro

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the ProShares UltraPro. In addition to that, Alcoa Corp is 1.14 times more volatile than ProShares UltraPro Short. It trades about -0.23 of its total potential returns per unit of risk. ProShares UltraPro Short is currently generating about 0.13 per unit of volatility. If you would invest  4,328  in ProShares UltraPro Short on December 5, 2024 and sell it today you would earn a total of  768.00  from holding ProShares UltraPro Short or generate 17.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  ProShares UltraPro Short

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ProShares UltraPro Short

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Short are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ProShares UltraPro showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and ProShares UltraPro

The main advantage of trading using opposite Alcoa Corp and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, ProShares UltraPro 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 UltraPro will offset losses from the drop in ProShares UltraPro's long position.

The idea behind Alcoa Corp and ProShares UltraPro Short 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.