Correlation Between ProShares UltraShort and Defiance

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Defiance 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 Defiance 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 Defiance SP 500, you can compare the effects of market volatilities on ProShares UltraShort and Defiance 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 Defiance. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Defiance.

Diversification Opportunities for ProShares UltraShort and Defiance

0.72

Correlation Coefficient

ProShares UltraShort  Defiance

Poor diversification

The 3 months correlation between ProShares and Defiance is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and Defiance SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance SP 500 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 Defiance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance SP 500 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Defiance go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Defiance

Considering the 90-day investment horizon ProShares UltraShort is expected to generate 1.25 times less return on investment than Defiance. In addition to that, ProShares UltraShort is 3.09 times more volatile than Defiance SP 500. It trades about 0.11 of its total potential returns per unit of risk. Defiance SP 500 is currently generating about 0.44 per unit of volatility. If you would invest  3,055  in Defiance SP 500 on April 30, 2025 and sell it today you would earn a total of  406.00  from holding Defiance SP 500 or generate 13.29% return on investment over 90 days.

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

ProShares UltraShort Yen  vs.  Defiance SP 500

ProShares UltraShort Yen

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Yen are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Defiance SP 500

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance SP 500 are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Defiance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraShort and Defiance

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

The idea behind ProShares UltraShort Yen and Defiance SP 500 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.