Correlation Between ProShares UltraShort and Overlay Shares

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

By analyzing existing cross correlation between ProShares UltraShort Yen and Overlay Shares Core, you can compare the effects of market volatilities on ProShares UltraShort and Overlay Shares 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 Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Overlay Shares.

Diversification Opportunities for ProShares UltraShort and Overlay Shares

-0.85

Correlation Coefficient

ProShares UltraShort  Overlay Shares

Pay attention - limited upside

The 3 months correlation between ProShares and Overlay is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and Overlay Shares Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Core 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 Yen are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Core has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Overlay Shares go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Overlay Shares

Considering the 90-day investment horizon ProShares UltraShort Yen is expected to generate 2.78 times more return on investment than Overlay Shares. However, ProShares UltraShort is 2.78 times more volatile than Overlay Shares Core. It trades about 0.05 of its potential returns per unit of risk. Overlay Shares Core is currently generating about 0.11 per unit of risk. If you would invest  3,909  in ProShares UltraShort Yen on August 26, 2024 and sell it today you would earn a total of  663.00  from holding ProShares UltraShort Yen or generate 16.96% return on investment over 90 days.

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

ProShares UltraShort Yen  vs.  Overlay Shares Core

ProShares UltraShort Yen

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Yen are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

Overlay Shares Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overlay Shares Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Overlay Shares is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraShort and Overlay Shares

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

The idea behind ProShares UltraShort Yen and Overlay Shares Core 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.