Correlation Between Verizon Communications and ProShares Ultra

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

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

Diversification Opportunities for Verizon Communications and ProShares Ultra

-0.36

Correlation Coefficient

Verizon Communications  ProShares Ultra

Very good diversification

The 3 months correlation between Verizon and ProShares is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and ProShares Ultra Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Tech and Verizon Communications 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 Verizon Communications 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 Tech has no effect on the direction of Verizon Communications i.e., Verizon Communications and ProShares Ultra go up and down completely randomly.

Pair Corralation between Verizon Communications and ProShares Ultra

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 4.83 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, Verizon Communications is 1.9 times less risky than ProShares Ultra. It trades about 0.04 of its potential returns per unit of risk. ProShares Ultra Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,315  in ProShares Ultra Technology on September 13, 2024 and sell it today you would earn a total of  5,009  from holding ProShares Ultra Technology or generate 216.37% return on investment over 90 days.

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

Verizon Communications  vs.  ProShares Ultra Technology

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

ProShares Ultra Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and ProShares Ultra

The main advantage of trading using opposite Verizon Communications and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications and ProShares Ultra Technology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..