Correlation Between Alcoa Corp and ProShares Ultra

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and ProShares Ultra 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 Ultra 20, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and ProShares Ultra.

Diversification Opportunities for Alcoa Corp and ProShares Ultra

-0.72

Correlation Coefficient

Alcoa Corp  ProShares Ultra

Pay attention - limited upside

The 3 months correlation between Alcoa and ProShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ProShares Ultra 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra 20 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 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 20 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ProShares Ultra go up and down completely randomly.

Pair Corralation between Alcoa Corp and ProShares Ultra

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the ProShares Ultra. In addition to that, Alcoa Corp is 1.79 times more volatile than ProShares Ultra 20. It trades about -0.08 of its total potential returns per unit of risk. ProShares Ultra 20 is currently generating about 0.03 per unit of volatility. If you would invest  1,686  in ProShares Ultra 20 on December 27, 2024 and sell it today you would earn a total of  44.00  from holding ProShares Ultra 20 or generate 2.61% return on investment over 90 days.

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

Alcoa Corp  vs.  ProShares Ultra 20

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 Ultra 20

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra 20 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, ProShares Ultra is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alcoa Corp and ProShares Ultra

The main advantage of trading using opposite Alcoa Corp and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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 Alcoa Corp and ProShares Ultra 20 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.