Correlation Between Microsoft and ProShares UltraShort

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

By analyzing existing cross correlation between Microsoft and ProShares UltraShort SmallCap600, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ProShares UltraShort.

Diversification Opportunities for Microsoft and ProShares UltraShort

-0.82

Correlation Coefficient

Microsoft  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between Microsoft and ProShares is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ProShares UltraShort SmallCap6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Microsoft and ProShares UltraShort

Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than ProShares UltraShort. However, Microsoft is 2.23 times less risky than ProShares UltraShort. It trades about 0.26 of its potential returns per unit of risk. ProShares UltraShort SmallCap600 is currently generating about -0.03 per unit of risk. If you would invest  44,832  in Microsoft on May 13, 2025 and sell it today you would earn a total of  7,372  from holding Microsoft or generate 16.44% return on investment over 90 days.

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

Microsoft  vs.  ProShares UltraShort SmallCap6

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

ProShares UltraShort

Risk-Adjusted Performance

Weakest

Over the last 90 days ProShares UltraShort SmallCap600 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and ProShares UltraShort

The main advantage of trading using opposite Microsoft and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft and ProShares UltraShort SmallCap600 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.