Correlation Between Home Depot and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both Home Depot 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 Home Depot and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and ProShares Ultra 20, you can compare the effects of market volatilities on Home Depot 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 Home Depot with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and ProShares Ultra.
Diversification Opportunities for Home Depot and ProShares Ultra
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and ProShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ProShares Ultra 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra 20 and Home Depot 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 Home Depot 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 20 has no effect on the direction of Home Depot i.e., Home Depot and ProShares Ultra go up and down completely randomly.
Pair Corralation between Home Depot and ProShares Ultra
Allowing for the 90-day total investment horizon Home Depot is expected to generate 4.23 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, Home Depot is 1.17 times less risky than ProShares Ultra. It trades about 0.04 of its potential returns per unit of risk. ProShares Ultra 20 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,700 in ProShares Ultra 20 on December 2, 2024 and sell it today you would earn a total of 175.00 from holding ProShares Ultra 20 or generate 10.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Home Depot vs. ProShares Ultra 20
Performance |
Timeline |
Home Depot |
ProShares Ultra 20 |
Home Depot and ProShares Ultra Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and ProShares Ultra
The main advantage of trading using opposite Home Depot and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot 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.Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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