Correlation Between ProShares UltraShort and Advanced Micro
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Advanced Micro 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 ProShares UltraShort and Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Bloomberg and Advanced Micro Devices, you can compare the effects of market volatilities on ProShares UltraShort and Advanced Micro 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 ProShares UltraShort with a short position of Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Advanced Micro.
Diversification Opportunities for ProShares UltraShort and Advanced Micro
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ProShares and Advanced is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices and ProShares UltraShort 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 ProShares UltraShort Bloomberg are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Advanced Micro go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Advanced Micro
Given the investment horizon of 90 days ProShares UltraShort Bloomberg is expected to generate 8.64 times more return on investment than Advanced Micro. However, ProShares UltraShort is 8.64 times more volatile than Advanced Micro Devices. It trades about 0.1 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.3 per unit of risk. If you would invest 7,119 in ProShares UltraShort Bloomberg on January 21, 2024 and sell it today you would earn a total of 100.00 from holding ProShares UltraShort Bloomberg or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. Advanced Micro Devices
Performance |
| Timeline |
| ProShares UltraShort |
| Advanced Micro Devices |
ProShares UltraShort and Advanced Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Advanced Micro
The main advantage of trading using opposite ProShares UltraShort and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Advanced Micro 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 Advanced Micro will offset losses from the drop in Advanced Micro's long position.The idea behind ProShares UltraShort Bloomberg and Advanced Micro Devices 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.
| Advanced Micro vs. Taiwan Semiconductor Manufacturing | Advanced Micro vs. Intel | Advanced Micro vs. Marvell Technology Group | Advanced Micro vs. Micron Technology |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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