Correlation Between Ford and ProShares Short

Can any of the company-specific risk be diversified away by investing in both Ford and ProShares Short 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 Short 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 Short 7 10, you can compare the effects of market volatilities on Ford and ProShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ProShares Short.

Diversification Opportunities for Ford and ProShares Short

0.25

Correlation Coefficient

Ford  ProShares Short

Modest diversification

The 3 months correlation between Ford and ProShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ProShares Short 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short 7 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short 7 has no effect on the direction of Ford i.e., Ford and ProShares Short go up and down completely randomly.

Pair Corralation between Ford and ProShares Short

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the ProShares Short. In addition to that, Ford is 4.83 times more volatile than ProShares Short 7 10. It trades about -0.05 of its total potential returns per unit of risk. ProShares Short 7 10 is currently generating about 0.22 per unit of volatility. If you would invest  2,803  in ProShares Short 7 10 on September 19, 2024 and sell it today you would earn a total of  169.00  from holding ProShares Short 7 10 or generate 6.03% return on investment over 90 days.

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

Ford Motor  vs.  ProShares Short 7 10

Ford Motor

Risk-Adjusted Performance

0 of 100

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 Short 7

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short 7 10 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, ProShares Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and ProShares Short

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

The idea behind Ford Motor and ProShares Short 7 10 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.