Correlation Between ProShares UltraPro and Lowes Companies

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

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

Diversification Opportunities for ProShares UltraPro and Lowes Companies

0.7

Correlation Coefficient

ProShares UltraPro  Lowes Companies

Poor diversification

The 3 months correlation between ProShares and Lowes is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro QQQ and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and ProShares UltraPro 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 UltraPro QQQ are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Lowes Companies go up and down completely randomly.

Pair Corralation between ProShares UltraPro and Lowes Companies

Given the investment horizon of 90 days ProShares UltraPro QQQ is expected to under-perform the Lowes Companies. In addition to that, ProShares UltraPro is 2.59 times more volatile than Lowes Companies. It trades about -0.19 of its total potential returns per unit of risk. Lowes Companies is currently generating about -0.32 per unit of volatility. If you would invest  25,022  in Lowes Companies on January 26, 2024 and sell it today you would lose (1,993) from holding Lowes Companies or give up 7.96% of portfolio value over 90 days.

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

ProShares UltraPro QQQ  vs.  Lowes Companies

ProShares UltraPro QQQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraPro QQQ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, ProShares UltraPro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Lowes Companies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowes Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lowes Companies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ProShares UltraPro and Lowes Companies

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

The idea behind ProShares UltraPro QQQ and Lowes Companies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.