Correlation Between ProShares UltraShort and Home Depot
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Home Depot 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 Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SmallCap600 and Home Depot, you can compare the effects of market volatilities on ProShares UltraShort and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Home Depot.
Diversification Opportunities for ProShares UltraShort and Home Depot
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and Home is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SmallCap6 and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 SmallCap600 are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Home Depot go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Home Depot
Considering the 90-day investment horizon ProShares UltraShort SmallCap600 is expected to generate 1.83 times more return on investment than Home Depot. However, ProShares UltraShort is 1.83 times more volatile than Home Depot. It trades about 0.21 of its potential returns per unit of risk. Home Depot is currently generating about -0.58 per unit of risk. If you would invest 1,783 in ProShares UltraShort SmallCap600 on January 27, 2024 and sell it today you would earn a total of 174.00 from holding ProShares UltraShort SmallCap600 or generate 9.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort SmallCap6 vs. Home Depot
Performance |
| Timeline |
| ProShares UltraShort |
| Home Depot |
ProShares UltraShort and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Home Depot
The main advantage of trading using opposite ProShares UltraShort and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.The idea behind ProShares UltraShort SmallCap600 and Home Depot 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.| Home Depot vs. Aquagold International | Home Depot vs. Thrivent High Yield | Home Depot vs. Morningstar Unconstrained Allocation | Home Depot vs. Via Renewables |
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..
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