Correlation Between Ocean Park and ProShares UltraShort

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

By analyzing existing cross correlation between Ocean Park High and ProShares UltraShort 20, you can compare the effects of market volatilities on Ocean Park 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 Ocean Park with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Park and ProShares UltraShort.

Diversification Opportunities for Ocean Park and ProShares UltraShort

-0.42

Correlation Coefficient

Ocean Park  ProShares UltraShort

Very good diversification

The 3 months correlation between Ocean and ProShares is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park High and ProShares UltraShort 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Ocean Park 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 Ocean Park High 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 Ocean Park i.e., Ocean Park and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Ocean Park and ProShares UltraShort

Given the investment horizon of 90 days Ocean Park is expected to generate 2.31 times less return on investment than ProShares UltraShort. But when comparing it to its historical volatility, Ocean Park High is 8.2 times less risky than ProShares UltraShort. It trades about 0.13 of its potential returns per unit of risk. ProShares UltraShort 20 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,245  in ProShares UltraShort 20 on September 19, 2024 and sell it today you would earn a total of  218.00  from holding ProShares UltraShort 20 or generate 6.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.6%
Values	Daily Returns

Ocean Park High  vs.  ProShares UltraShort 20

Ocean Park High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Park High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Ocean Park is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

ProShares UltraShort

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ocean Park and ProShares UltraShort

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

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.