Correlation Between GE Aerospace and ProShares UltraPro

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

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

Diversification Opportunities for GE Aerospace and ProShares UltraPro

-0.38

Correlation Coefficient

GE Aerospace  ProShares UltraPro

Very good diversification

The 3 months correlation between GE Aerospace and ProShares is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and ProShares UltraPro QQQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro QQQ and GE Aerospace 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 GE Aerospace are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro QQQ has no effect on the direction of GE Aerospace i.e., GE Aerospace and ProShares UltraPro go up and down completely randomly.

Pair Corralation between GE Aerospace and ProShares UltraPro

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the ProShares UltraPro. But the stock apears to be less risky and, when comparing its historical volatility, GE Aerospace is 1.51 times less risky than ProShares UltraPro. The stock trades about -0.06 of its potential returns per unit of risk. The ProShares UltraPro QQQ is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,624  in ProShares UltraPro QQQ on September 15, 2024 and sell it today you would earn a total of  2,316  from holding ProShares UltraPro QQQ or generate 34.96% return on investment over 90 days.

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

GE Aerospace  vs.  ProShares UltraPro QQQ

GE Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GE Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ProShares UltraPro QQQ

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro QQQ are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ProShares UltraPro reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and ProShares UltraPro

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

The idea behind GE Aerospace and ProShares UltraPro QQQ 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.