Correlation Between ProShares UltraShort and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and MicroSectors FANG 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 MicroSectors FANG 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 MicroSectors FANG Index, you can compare the effects of market volatilities on ProShares UltraShort and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and MicroSectors FANG.
Diversification Opportunities for ProShares UltraShort and MicroSectors FANG
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between ProShares and MicroSectors is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and MicroSectors FANG go up and down completely randomly.
Pair Corralation between ProShares UltraShort and MicroSectors FANG
Given the investment horizon of 90 days ProShares UltraShort Bloomberg is expected to generate 1.31 times more return on investment than MicroSectors FANG. However, ProShares UltraShort is 1.31 times more volatile than MicroSectors FANG Index. It trades about 0.01 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about -0.08 per unit of risk. If you would invest 6,938 in ProShares UltraShort Bloomberg on September 3, 2024 and sell it today you would lose (1,068) from holding ProShares UltraShort Bloomberg or give up 15.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. MicroSectors FANG Index
Performance |
| Timeline |
| ProShares UltraShort |
| MicroSectors FANG Index |
ProShares UltraShort and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and MicroSectors FANG
The main advantage of trading using opposite ProShares UltraShort and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.The idea behind ProShares UltraShort Bloomberg and MicroSectors FANG Index 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.
| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |