Correlation Between IShares Oil and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both IShares Oil 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 IShares Oil and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Oil Gas and ProShares UltraShort SP500, you can compare the effects of market volatilities on IShares Oil 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 IShares Oil with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Oil and ProShares UltraShort.
Diversification Opportunities for IShares Oil and ProShares UltraShort
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and ProShares is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Oil Gas and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and IShares Oil 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 iShares Oil Gas 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 IShares Oil i.e., IShares Oil and ProShares UltraShort go up and down completely randomly.
Pair Corralation between IShares Oil and ProShares UltraShort
Considering the 90-day investment horizon iShares Oil Gas is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, iShares Oil Gas is 1.46 times less risky than ProShares UltraShort. The etf trades about -0.25 of its potential returns per unit of risk. The ProShares UltraShort SP500 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,589 in ProShares UltraShort SP500 on February 4, 2024 and sell it today you would earn a total of 36.00 from holding ProShares UltraShort SP500 or generate 1.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Oil Gas vs. ProShares UltraShort SP500
Performance |
Timeline |
iShares Oil Gas |
ProShares UltraShort |
IShares Oil and ProShares UltraShort Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Oil and ProShares UltraShort
The main advantage of trading using opposite IShares Oil and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Oil 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.IShares Oil vs. iShares Oil Equipment | IShares Oil vs. iShares Energy ETF | IShares Oil vs. Invesco Dynamic Energy | IShares Oil vs. SPDR SP Oil |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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