Correlation Between IShares Telecommunicatio and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both IShares Telecommunicatio 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 Telecommunicatio 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 Telecommunications ETF and ProShares UltraShort MidCap400, you can compare the effects of market volatilities on IShares Telecommunicatio 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 Telecommunicatio with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Telecommunicatio and ProShares UltraShort.

Diversification Opportunities for IShares Telecommunicatio and ProShares UltraShort

-0.88

Correlation Coefficient

IShares Telecommunicatio  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between IShares and ProShares is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Telecommunications ETF and ProShares UltraShort MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and IShares Telecommunicatio 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 Telecommunications ETF 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 Telecommunicatio i.e., IShares Telecommunicatio and ProShares UltraShort go up and down completely randomly.

Pair Corralation between IShares Telecommunicatio and ProShares UltraShort

Considering the 90-day investment horizon IShares Telecommunicatio is expected to generate 280.72 times less return on investment than ProShares UltraShort. But when comparing it to its historical volatility, iShares Telecommunications ETF is 2.07 times less risky than ProShares UltraShort. It trades about 0.0 of its potential returns per unit of risk. ProShares UltraShort MidCap400 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  892.00  in ProShares UltraShort MidCap400 on September 22, 2024 and sell it today you would earn a total of  95.00  from holding ProShares UltraShort MidCap400 or generate 10.65% return on investment over 90 days.

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

iShares Telecommunications ETF  vs.  ProShares UltraShort MidCap400

IShares Telecommunicatio

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Telecommunications ETF are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, IShares Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort MidCap400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ProShares UltraShort is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Telecommunicatio and ProShares UltraShort

The main advantage of trading using opposite IShares Telecommunicatio and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Telecommunicatio 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 Telecommunications ETF and ProShares UltraShort MidCap400 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..