Correlation Between NYSE Composite and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and ProShares UltraShort SP500, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and ProShares UltraShort.
Diversification Opportunities for NYSE Composite and ProShares UltraShort
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NYSE and ProShares is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and ProShares UltraShort go up and down completely randomly.
Pair Corralation between NYSE Composite and ProShares UltraShort
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the ProShares UltraShort. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 2.41 times less risky than ProShares UltraShort. The index trades about -0.18 of its potential returns per unit of risk. The ProShares UltraShort SP500 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,496 in ProShares UltraShort SP500 on January 30, 2024 and sell it today you would earn a total of 157.00 from holding ProShares UltraShort SP500 or generate 6.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
NYSE Composite vs. ProShares UltraShort SP500
Performance |
Timeline |
NYSE Composite and ProShares UltraShort Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
ProShares UltraShort SP500
Pair trading matchups for ProShares UltraShort
Pair Trading with NYSE Composite and ProShares UltraShort
The main advantage of trading using opposite NYSE Composite and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.NYSE Composite vs. Dennys Corp | NYSE Composite vs. Asbury Automotive Group | NYSE Composite vs. Arrow Electronics | NYSE Composite vs. Biglari Holdings |
ProShares UltraShort vs. ProShares UltraShort QQQ | ProShares UltraShort vs. ProShares UltraShort Dow30 | ProShares UltraShort vs. ProShares Ultra SP500 | ProShares UltraShort vs. ProShares Short SP500 |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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