Correlation Between PROSHARES ULTRASHORT and Sterling Construction

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

By analyzing existing cross correlation between PROSHARES ULTRASHORT RUSSELL and Sterling Construction, you can compare the effects of market volatilities on PROSHARES ULTRASHORT and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROSHARES ULTRASHORT and Sterling Construction.

Diversification Opportunities for PROSHARES ULTRASHORT and Sterling Construction

0.79

Correlation Coefficient

PROSHARES ULTRASHORT  Sterling Construction

Poor diversification

The 3 months correlation between PROSHARES and Sterling is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding PROSHARES ULTRASHORT RUSSELL and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 RUSSELL are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of PROSHARES ULTRASHORT i.e., PROSHARES ULTRASHORT and Sterling Construction go up and down completely randomly.

Pair Corralation between PROSHARES ULTRASHORT and Sterling Construction

Considering the 90-day investment horizon PROSHARES ULTRASHORT RUSSELL is expected to under-perform the Sterling Construction. But the etf apears to be less risky and, when comparing its historical volatility, PROSHARES ULTRASHORT RUSSELL is 1.17 times less risky than Sterling Construction. The etf trades about -0.09 of its potential returns per unit of risk. The Sterling Construction is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  17,715  in Sterling Construction on January 15, 2025 and sell it today you would lose (3,259) from holding Sterling Construction or give up 18.4% of portfolio value over 90 days.

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

PROSHARES ULTRASHORT RUSSELL  vs.  Sterling Construction

PROSHARES ULTRASHORT

Risk-Adjusted Performance

Very Weak

Over the last 90 days PROSHARES ULTRASHORT RUSSELL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Etf's forward-looking signals remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Sterling Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with PROSHARES ULTRASHORT and Sterling Construction

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

The idea behind PROSHARES ULTRASHORT RUSSELL and Sterling Construction 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.