Correlation Between Ford and ProShares Ultra

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Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ProShares Ultra Technology, you can compare the effects of market volatilities on Ford 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 Ford with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ProShares Ultra.

Diversification Opportunities for Ford and ProShares Ultra

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ford and ProShares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ProShares Ultra Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Tech and Ford 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 Ford Motor 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 Tech has no effect on the direction of Ford i.e., Ford and ProShares Ultra go up and down completely randomly.

Pair Corralation between Ford and ProShares Ultra

Taking into account the 90-day investment horizon Ford is expected to generate 6.4 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, Ford Motor is 1.17 times less risky than ProShares Ultra. It trades about 0.02 of its potential returns per unit of risk. ProShares Ultra Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,315  in ProShares Ultra Technology on September 13, 2024 and sell it today you would earn a total of  5,009  from holding ProShares Ultra Technology or generate 216.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  ProShares Ultra Technology

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
ProShares Ultra Tech 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

Ford and ProShares Ultra Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and ProShares Ultra

The main advantage of trading using opposite Ford and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and ProShares Ultra 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.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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