Correlation Between ProShares UltraShort and ProShares Trust
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and ProShares Trust 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 Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Bloomberg and ProShares Trust , you can compare the effects of market volatilities on ProShares UltraShort and ProShares Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares Trust.
Diversification Opportunities for ProShares UltraShort and ProShares Trust
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and ProShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 Bloomberg are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Trust go up and down completely randomly.
Pair Corralation between ProShares UltraShort and ProShares Trust
Given the investment horizon of 90 days ProShares UltraShort Bloomberg is expected to under-perform the ProShares Trust. In addition to that, ProShares UltraShort is 2.82 times more volatile than ProShares Trust . It trades about -0.24 of its total potential returns per unit of risk. ProShares Trust is currently generating about -0.13 per unit of volatility. If you would invest 2,326 in ProShares Trust on October 20, 2024 and sell it today you would lose (205.00) from holding ProShares Trust or give up 8.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. ProShares Trust
Performance |
| Timeline |
| ProShares UltraShort |
| ProShares Trust |
ProShares UltraShort and ProShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and ProShares Trust
The main advantage of trading using opposite ProShares UltraShort and ProShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, ProShares Trust 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 Trust will offset losses from the drop in ProShares Trust's long position.The idea behind ProShares UltraShort Bloomberg and ProShares Trust 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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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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