Correlation Between Stellar and ProShares UltraShort

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

By analyzing existing cross correlation between Stellar and ProShares UltraShort SP500, you can compare the effects of market volatilities on Stellar 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 Stellar with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and ProShares UltraShort.

Diversification Opportunities for Stellar and ProShares UltraShort

-0.73

Correlation Coefficient

Stellar  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between Stellar and ProShares is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Stellar 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 Stellar 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 Stellar i.e., Stellar and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Stellar and ProShares UltraShort

Assuming the 90 days trading horizon Stellar is expected to under-perform the ProShares UltraShort. In addition to that, Stellar is 2.35 times more volatile than ProShares UltraShort SP500. It trades about -0.2 of its total potential returns per unit of risk. ProShares UltraShort SP500 is currently generating about 0.19 per unit of volatility. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Stellar  vs.  ProShares UltraShort SP500

Stellar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar may actually be approaching a critical reversion point that can send shares even higher in May 2024.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Stellar and ProShares UltraShort

The main advantage of trading using opposite Stellar and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar and ProShares UltraShort SP500 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.