Correlation Between Exxon and ProShares UltraShort

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

By analyzing existing cross correlation between Exxon Mobil Corp and ProShares UltraShort Utilities, you can compare the effects of market volatilities on Exxon and ProShares UltraShort 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 Exxon with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and ProShares UltraShort.

Diversification Opportunities for Exxon and ProShares UltraShort

-0.73

Correlation Coefficient

Exxon  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between Exxon and ProShares is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Exxon 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 Exxon Mobil Corp are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Exxon i.e., Exxon and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Exxon and ProShares UltraShort

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.68 times more return on investment than ProShares UltraShort. However, Exxon Mobil Corp is 1.47 times less risky than ProShares UltraShort. It trades about 0.01 of its potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about -0.01 per unit of risk. If you would invest  10,581  in Exxon Mobil Corp on October 4, 2024 and sell it today you would earn a total of  176.00  from holding Exxon Mobil Corp or generate 1.66% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  ProShares UltraShort Utilities

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ProShares UltraShort

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Utilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, ProShares UltraShort reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and ProShares UltraShort

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

The idea behind Exxon Mobil Corp and ProShares UltraShort Utilities 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.