Correlation Between IShares Aerospace and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both IShares Aerospace 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 Aerospace 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 Aerospace Defense and ProShares UltraShort Utilities, you can compare the effects of market volatilities on IShares Aerospace 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 Aerospace with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Aerospace and ProShares UltraShort.

Diversification Opportunities for IShares Aerospace and ProShares UltraShort

-0.87

Correlation Coefficient

IShares Aerospace  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between IShares and ProShares is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Aerospace Defense and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and IShares Aerospace 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 Aerospace Defense 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 Aerospace i.e., IShares Aerospace and ProShares UltraShort go up and down completely randomly.

Pair Corralation between IShares Aerospace and ProShares UltraShort

Considering the 90-day investment horizon iShares Aerospace Defense is expected to generate 0.55 times more return on investment than ProShares UltraShort. However, iShares Aerospace Defense is 1.82 times less risky than ProShares UltraShort. It trades about 0.21 of its potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about -0.1 per unit of risk. If you would invest  17,511  in iShares Aerospace Defense on May 27, 2025 and sell it today you would earn a total of  2,070  from holding iShares Aerospace Defense or generate 11.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

iShares Aerospace Defense  vs.  ProShares UltraShort Utilities

iShares Aerospace Defense

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Aerospace Defense are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Aerospace may actually be approaching a critical reversion point that can send shares even higher in September 2025.

ProShares UltraShort

Risk-Adjusted Performance

Weakest

Over the last 90 days ProShares UltraShort Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Etf's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with IShares Aerospace and ProShares UltraShort

The main advantage of trading using opposite IShares Aerospace and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Aerospace 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 iShares Aerospace Defense and ProShares UltraShort Utilities 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.