Correlation Between ProShares UltraPro and ProShares VIX
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and ProShares VIX 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 UltraPro and ProShares VIX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraPro Short and ProShares VIX Short Term, you can compare the effects of market volatilities on ProShares UltraPro and ProShares VIX 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 UltraPro with a short position of ProShares VIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and ProShares VIX.
Diversification Opportunities for ProShares UltraPro and ProShares VIX
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ProShares and ProShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Short and ProShares VIX Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares VIX Short and ProShares UltraPro 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 UltraPro Short are associated (or correlated) with ProShares VIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares VIX Short has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and ProShares VIX go up and down completely randomly.
Pair Corralation between ProShares UltraPro and ProShares VIX
Given the investment horizon of 90 days ProShares UltraPro Short is expected to under-perform the ProShares VIX. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraPro Short is 1.97 times less risky than ProShares VIX. The etf trades about -0.07 of its potential returns per unit of risk. The ProShares VIX Short Term is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,568 in ProShares VIX Short Term on August 24, 2024 and sell it today you would earn a total of 129.00 from holding ProShares VIX Short Term or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraPro Short vs. ProShares VIX Short Term
Performance |
| Timeline |
| ProShares UltraPro Short |
| ProShares VIX Short |
ProShares UltraPro and ProShares VIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and ProShares VIX
The main advantage of trading using opposite ProShares UltraPro and ProShares VIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro position performs unexpectedly, ProShares VIX 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 VIX will offset losses from the drop in ProShares VIX's long position.The idea behind ProShares UltraPro Short and ProShares VIX Short Term 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 VIX vs. ProShares VIX Mid Term | ProShares VIX vs. ProShares Short VIX | ProShares VIX vs. ProShares Ultra VIX | ProShares VIX vs. iPath Series B |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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