Correlation Between ProShares UltraShort and ProShares Short
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and ProShares Short 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 Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort MidCap400 and ProShares Short MidCap400, you can compare the effects of market volatilities on ProShares UltraShort and ProShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares Short.
Diversification Opportunities for ProShares UltraShort and ProShares Short
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between ProShares and ProShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort MidCap400 and ProShares Short MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MidCap400 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 MidCap400 are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short MidCap400 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Short go up and down completely randomly.
Pair Corralation between ProShares UltraShort and ProShares Short
Considering the 90-day investment horizon ProShares UltraShort MidCap400 is expected to under-perform the ProShares Short. In addition to that, ProShares UltraShort is 2.01 times more volatile than ProShares Short MidCap400. It trades about -0.27 of its total potential returns per unit of risk. ProShares Short MidCap400 is currently generating about -0.27 per unit of volatility. If you would invest 1,927 in ProShares Short MidCap400 on August 26, 2024 and sell it today you would lose (133.00) from holding ProShares Short MidCap400 or give up 6.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort MidCap400 vs. ProShares Short MidCap400
Performance |
| Timeline |
| ProShares UltraShort |
| ProShares Short MidCap400 |
ProShares UltraShort and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and ProShares Short
The main advantage of trading using opposite ProShares UltraShort and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short's long position.The idea behind ProShares UltraShort MidCap400 and ProShares Short MidCap400 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.
| ProShares Short vs. ProShares Short SmallCap600 | ProShares Short vs. ProShares UltraShort MidCap400 | ProShares Short vs. ProShares UltraShort SmallCap600 | ProShares Short vs. ProShares Short MSCI |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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