Correlation Between Procter Gamble and ProShares Ultra

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

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

Diversification Opportunities for Procter Gamble and ProShares Ultra

-0.46

Correlation Coefficient

Procter Gamble  ProShares Ultra

Very good diversification

The 3 months correlation between Procter and ProShares is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble and ProShares Ultra FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra FTSE and Procter Gamble 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 Procter Gamble 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 FTSE has no effect on the direction of Procter Gamble i.e., Procter Gamble and ProShares Ultra go up and down completely randomly.

Pair Corralation between Procter Gamble and ProShares Ultra

Allowing for the 90-day total investment horizon Procter Gamble is expected to under-perform the ProShares Ultra. But the stock apears to be less risky and, when comparing its historical volatility, Procter Gamble is 4.57 times less risky than ProShares Ultra. The stock trades about -0.01 of its potential returns per unit of risk. The ProShares Ultra FTSE is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,878  in ProShares Ultra FTSE on September 19, 2024 and sell it today you would earn a total of  13.00  from holding ProShares Ultra FTSE or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Procter Gamble  vs.  ProShares Ultra FTSE

Procter Gamble

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares Ultra FTSE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra FTSE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, ProShares Ultra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Procter Gamble and ProShares Ultra

The main advantage of trading using opposite Procter Gamble and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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 Procter Gamble and ProShares Ultra FTSE 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.