Correlation Between ProShares UltraShort and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 ProShares UltraShort and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SP500 and ProShares UltraShort Russell2000, you can compare the effects of market volatilities on ProShares UltraShort 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 ProShares UltraShort with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares UltraShort.
Diversification Opportunities for ProShares UltraShort and ProShares UltraShort
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and ProShares UltraShort Russell20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 SP500 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 ProShares UltraShort i.e., ProShares UltraShort and ProShares UltraShort go up and down completely randomly.
Pair Corralation between ProShares UltraShort and ProShares UltraShort
Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort SP500 is 1.32 times less risky than ProShares UltraShort. The etf trades about -0.03 of its potential returns per unit of risk. The ProShares UltraShort Russell2000 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,677 in ProShares UltraShort Russell2000 on January 26, 2024 and sell it today you would lose (489.00) from holding ProShares UltraShort Russell2000 or give up 29.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort SP500 vs. ProShares UltraShort Russell20
Performance |
| Timeline |
| ProShares UltraShort |
| ProShares UltraShort |
ProShares UltraShort and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and ProShares UltraShort
The main advantage of trading using opposite ProShares UltraShort and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 ProShares UltraShort SP500 and ProShares UltraShort Russell2000 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.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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