Correlation Between Innovator Nasdaq and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Innovator Nasdaq 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 Innovator Nasdaq and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator Nasdaq 100 Power and ProShares UltraShort Bloomberg, you can compare the effects of market volatilities on Innovator Nasdaq 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 Innovator Nasdaq with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Nasdaq and ProShares UltraShort.
Diversification Opportunities for Innovator Nasdaq and ProShares UltraShort
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Innovator and ProShares is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Nasdaq 100 Power and ProShares UltraShort Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Innovator Nasdaq 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 Innovator Nasdaq 100 Power 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 Innovator Nasdaq i.e., Innovator Nasdaq and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Innovator Nasdaq and ProShares UltraShort
Given the investment horizon of 90 days Innovator Nasdaq is expected to generate 5.1 times less return on investment than ProShares UltraShort. But when comparing it to its historical volatility, Innovator Nasdaq 100 Power is 16.59 times less risky than ProShares UltraShort. It trades about 0.14 of its potential returns per unit of risk. ProShares UltraShort Bloomberg is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,833 in ProShares UltraShort Bloomberg on November 5, 2024 and sell it today you would earn a total of 1,189 from holding ProShares UltraShort Bloomberg or generate 41.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Innovator Nasdaq 100 Power vs. ProShares UltraShort Bloomberg
Performance |
| Timeline |
| Innovator Nasdaq 100 |
| ProShares UltraShort |
Innovator Nasdaq and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Nasdaq and ProShares UltraShort
The main advantage of trading using opposite Innovator Nasdaq and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Nasdaq 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.| Innovator Nasdaq vs. FT Vest Equity | Innovator Nasdaq vs. Northern Lights | Innovator Nasdaq vs. Dimensional International High | Innovator Nasdaq vs. First Trust Exchange Traded |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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