Correlation Between Dow Jones and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and ProShares UltraShort 7 10, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ProShares UltraShort.
Diversification Opportunities for Dow Jones and ProShares UltraShort
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and ProShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ProShares UltraShort 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Dow Jones and ProShares UltraShort
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.68 times more return on investment than ProShares UltraShort. However, Dow Jones Industrial is 1.48 times less risky than ProShares UltraShort. It trades about 0.09 of its potential returns per unit of risk. ProShares UltraShort 7 10 is currently generating about 0.04 per unit of risk. If you would invest 3,363,061 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 1,110,596 from holding Dow Jones Industrial or generate 33.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. ProShares UltraShort 7 10
Performance |
| Timeline |
Dow Jones and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ProShares UltraShort 7 10
Pair trading matchups for ProShares UltraShort
Pair Trading with Dow Jones and ProShares UltraShort
The main advantage of trading using opposite Dow Jones and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| ProShares UltraShort vs. ProShares UltraShort 20 | ProShares UltraShort vs. ProShares UltraShort MSCI | ProShares UltraShort vs. ProShares Short 20 | ProShares UltraShort vs. ProShares UltraShort Health |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |