Correlation Between ProShares UltraShort and ProShares Decline

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

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

Diversification Opportunities for ProShares UltraShort and ProShares Decline

0.92

Correlation Coefficient

ProShares UltraShort  ProShares Decline

Almost no diversification

The 3 months correlation between ProShares and ProShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and ProShares Decline of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Decline and ProShares UltraShort 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 ProShares UltraShort SP500 are associated (or correlated) with ProShares Decline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Decline has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Decline go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ProShares Decline

Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to under-perform the ProShares Decline. In addition to that, ProShares UltraShort is 1.22 times more volatile than ProShares Decline of. It trades about -0.29 of its total potential returns per unit of risk. ProShares Decline of is currently generating about -0.22 per unit of volatility. If you would invest  1,375  in ProShares Decline of on April 25, 2025 and sell it today you would lose (219.00) from holding ProShares Decline of or give up 15.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

ProShares UltraShort SP500  vs.  ProShares Decline of

ProShares UltraShort

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Etf's fundamental indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

ProShares Decline

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Decline of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with ProShares UltraShort and ProShares Decline

The main advantage of trading using opposite ProShares UltraShort and ProShares Decline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, ProShares Decline 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 Decline will offset losses from the drop in ProShares Decline's long position.

The idea behind ProShares UltraShort SP500 and ProShares Decline of 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.