Correlation Between ProShares UltraShort and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on ProShares UltraShort and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Dow Jones.
Diversification Opportunities for ProShares UltraShort and Dow Jones
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between ProShares and Dow is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Dow Jones go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Dow Jones
Given the investment horizon of 90 days ProShares UltraShort Bloomberg is expected to generate 9.07 times more return on investment than Dow Jones. However, ProShares UltraShort is 9.07 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of risk. If you would invest 4,086 in ProShares UltraShort Bloomberg on August 25, 2024 and sell it today you would earn a total of 2,077 from holding ProShares UltraShort Bloomberg or generate 50.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. Dow Jones Industrial
Performance |
| Timeline |
ProShares UltraShort and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ProShares UltraShort Bloomberg
Pair trading matchups for ProShares UltraShort
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ProShares UltraShort and Dow Jones
The main advantage of trading using opposite ProShares UltraShort and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| ProShares UltraShort vs. DB Gold Short | ProShares UltraShort vs. DB Gold Double | ProShares UltraShort vs. ProShares UltraShort Gold | ProShares UltraShort vs. ProShares UltraShort Basic |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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