Correlation Between American Sierra and ProShares

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

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

Diversification Opportunities for American Sierra and ProShares

-0.4

Correlation Coefficient

American Sierra  ProShares

Very good diversification

The 3 months correlation between American and ProShares is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding American Sierra Gold and ProShares SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP MidCap and American Sierra 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 American Sierra Gold are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP MidCap has no effect on the direction of American Sierra i.e., American Sierra and ProShares go up and down completely randomly.

Pair Corralation between American Sierra and ProShares

Given the investment horizon of 90 days American Sierra Gold is expected to generate 18.47 times more return on investment than ProShares. However, American Sierra is 18.47 times more volatile than ProShares SP MidCap. It trades about 0.04 of its potential returns per unit of risk. ProShares SP MidCap is currently generating about 0.09 per unit of risk. If you would invest  0.60  in American Sierra Gold on September 14, 2024 and sell it today you would lose (0.20) from holding American Sierra Gold or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

American Sierra Gold  vs.  ProShares SP MidCap

American Sierra Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Sierra Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, American Sierra reported solid returns over the last few months and may actually be approaching a breakup point.

ProShares SP MidCap

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP MidCap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with American Sierra and ProShares

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

The idea behind American Sierra Gold and ProShares SP MidCap 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.