Correlation Between ProShares Ultra and PEMEX

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

By analyzing existing cross correlation between ProShares Ultra Dow30 and PEMEX PROJ FDG, you can compare the effects of market volatilities on ProShares Ultra and PEMEX 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 Ultra with a short position of PEMEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and PEMEX.

Diversification Opportunities for ProShares Ultra and PEMEX

-0.31

Correlation Coefficient

ProShares Ultra  PEMEX

Very good diversification

The 3 months correlation between ProShares and PEMEX is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Dow30 and PEMEX PROJ FDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEMEX PROJ FDG and ProShares Ultra 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 Ultra Dow30 are associated (or correlated) with PEMEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEMEX PROJ FDG has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and PEMEX go up and down completely randomly.

Pair Corralation between ProShares Ultra and PEMEX

Considering the 90-day investment horizon ProShares Ultra Dow30 is expected to generate 0.77 times more return on investment than PEMEX. However, ProShares Ultra Dow30 is 1.3 times less risky than PEMEX. It trades about 0.19 of its potential returns per unit of risk. PEMEX PROJ FDG is currently generating about 0.01 per unit of risk. If you would invest  8,983  in ProShares Ultra Dow30 on August 31, 2024 and sell it today you would earn a total of  1,724  from holding ProShares Ultra Dow30 or generate 19.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

ProShares Ultra Dow30  vs.  PEMEX PROJ FDG

ProShares Ultra Dow30

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Dow30 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

PEMEX PROJ FDG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEMEX PROJ FDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PEMEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and PEMEX

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

The idea behind ProShares Ultra Dow30 and PEMEX PROJ FDG 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.