Correlation Between GM and ProShares Ultra

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

By analyzing existing cross correlation between General Motors and ProShares Ultra Silver, you can compare the effects of market volatilities on GM 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 GM with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and ProShares Ultra.

Diversification Opportunities for GM and ProShares Ultra

-0.22

Correlation Coefficient

GM  ProShares Ultra

Very good diversification

The 3 months correlation between GM and ProShares is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ProShares Ultra Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Silver and GM 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 General Motors 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 Silver has no effect on the direction of GM i.e., GM and ProShares Ultra go up and down completely randomly.

Pair Corralation between GM and ProShares Ultra

Allowing for the 90-day total investment horizon GM is expected to generate 1.17 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, General Motors is 1.76 times less risky than ProShares Ultra. It trades about 0.05 of its potential returns per unit of risk. ProShares Ultra Silver is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,072  in ProShares Ultra Silver on October 19, 2024 and sell it today you would earn a total of  836.00  from holding ProShares Ultra Silver or generate 27.21% return on investment over 90 days.

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

General Motors  vs.  ProShares Ultra Silver

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ProShares Ultra Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Etf's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with GM and ProShares Ultra

The main advantage of trading using opposite GM and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and ProShares Ultra Silver 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.