Correlation Between Chevron Corp and ProShares UltraShort

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

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

Diversification Opportunities for Chevron Corp and ProShares UltraShort

-0.28

Correlation Coefficient

Chevron Corp  ProShares UltraShort

Very good diversification

The 3 months correlation between Chevron and ProShares is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and ProShares UltraShort Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Chevron 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Chevron Corp and ProShares UltraShort

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the ProShares UltraShort. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.79 times less risky than ProShares UltraShort. The stock trades about -0.44 of its potential returns per unit of risk. The ProShares UltraShort Technology is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,009  in ProShares UltraShort Technology on September 30, 2024 and sell it today you would lose (30.00) from holding ProShares UltraShort Technology or give up 2.97% of portfolio value over 90 days.

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

Chevron Corp  vs.  ProShares UltraShort Technolog

Chevron Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Chevron Corp and ProShares UltraShort

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

The idea behind Chevron Corp and ProShares UltraShort Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.