Correlation Between ProShares Short and Northern Lights
Can any of the company-specific risk be diversified away by investing in both ProShares Short and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Short SP500 and Northern Lights, you can compare the effects of market volatilities on ProShares Short and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and Northern Lights.
Diversification Opportunities for ProShares Short and Northern Lights
-0.96 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and Northern is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short SP500 and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 SP500 are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of ProShares Short i.e., ProShares Short and Northern Lights go up and down completely randomly.
Pair Corralation between ProShares Short and Northern Lights
Allowing for the 90-day total investment horizon ProShares Short SP500 is expected to under-perform the Northern Lights. In addition to that, ProShares Short is 1.03 times more volatile than Northern Lights. It trades about -0.09 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.1 per unit of volatility. If you would invest 3,061 in Northern Lights on August 29, 2024 and sell it today you would earn a total of 524.00 from holding Northern Lights or generate 17.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Short SP500 vs. Northern Lights
Performance |
| Timeline |
| ProShares Short SP500 |
| Northern Lights |
ProShares Short and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Short and Northern Lights
The main advantage of trading using opposite ProShares Short and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| ProShares Short vs. ProShares Short QQQ | ProShares Short vs. ProShares Short Dow30 | ProShares Short vs. ProShares UltraShort SP500 | ProShares Short vs. ProShares Short Russell2000 |
| Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares Expanded Tech Software |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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