Correlation Between ProShares Short and ProShares Ultra

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Can any of the company-specific risk be diversified away by investing in both ProShares Short and ProShares Ultra 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 Short and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Short Russell2000 and ProShares Ultra MSCI, you can compare the effects of market volatilities on ProShares Short and ProShares Ultra 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 Short with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and ProShares Ultra.

Diversification Opportunities for ProShares Short and ProShares Ultra

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between ProShares and ProShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short Russell2000 and ProShares Ultra MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra MSCI and ProShares Short 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 Short Russell2000 are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra MSCI has no effect on the direction of ProShares Short i.e., ProShares Short and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares Short and ProShares Ultra

Considering the 90-day investment horizon ProShares Short Russell2000 is expected to generate 0.5 times more return on investment than ProShares Ultra. However, ProShares Short Russell2000 is 1.98 times less risky than ProShares Ultra. It trades about -0.06 of its potential returns per unit of risk. ProShares Ultra MSCI is currently generating about -0.07 per unit of risk. If you would invest  2,175  in ProShares Short Russell2000 on September 6, 2024 and sell it today you would lose (428.00) from holding ProShares Short Russell2000 or give up 19.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Short Russell2000  vs.  ProShares Ultra MSCI

 Performance 
       Timeline  
ProShares Short Russ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares Short Russell2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.
ProShares Ultra MSCI 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares Ultra MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Etf's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

ProShares Short and ProShares Ultra Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Short and ProShares Ultra

The main advantage of trading using opposite ProShares Short and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short position performs unexpectedly, ProShares Ultra 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 Ultra will offset losses from the drop in ProShares Ultra's long position.
The idea behind ProShares Short Russell2000 and ProShares Ultra MSCI 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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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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