Correlation Between ProShares UltraShort and IShares Core
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and IShares Core 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 IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort 20 and iShares Core SP, you can compare the effects of market volatilities on ProShares UltraShort and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and IShares Core.
Diversification Opportunities for ProShares UltraShort and IShares Core
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 20 are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IShares Core go up and down completely randomly.
Pair Corralation between ProShares UltraShort and IShares Core
Considering the 90-day investment horizon ProShares UltraShort 20 is expected to under-perform the IShares Core. In addition to that, ProShares UltraShort is 2.87 times more volatile than iShares Core SP. It trades about -0.03 of its total potential returns per unit of risk. iShares Core SP is currently generating about 0.25 per unit of volatility. If you would invest 9,557 in iShares Core SP on August 29, 2024 and sell it today you would earn a total of 412.00 from holding iShares Core SP or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort 20 vs. iShares Core SP
Performance |
| Timeline |
| ProShares UltraShort |
| iShares Core SP |
ProShares UltraShort and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and IShares Core
The main advantage of trading using opposite ProShares UltraShort and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| ProShares UltraShort vs. ProShares UltraShort 7 10 | ProShares UltraShort vs. ProShares UltraShort SP500 | ProShares UltraShort vs. iShares 20 Year | ProShares UltraShort vs. Direxion Daily 20 |
| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core MSCI | IShares Core vs. iShares Broad USD | IShares Core vs. iShares Core SP |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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