Correlation Between ProShares Ultra and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and IShares MSCI 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 Ultra and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Ultra Euro and iShares MSCI USA, you can compare the effects of market volatilities on ProShares Ultra and IShares MSCI 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 Ultra with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and IShares MSCI.
Diversification Opportunities for ProShares Ultra and IShares MSCI
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and IShares is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA and ProShares Ultra 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 Ultra Euro are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IShares MSCI go up and down completely randomly.
Pair Corralation between ProShares Ultra and IShares MSCI
Considering the 90-day investment horizon ProShares Ultra Euro is expected to under-perform the IShares MSCI. In addition to that, ProShares Ultra is 1.5 times more volatile than iShares MSCI USA. It trades about -0.27 of its total potential returns per unit of risk. iShares MSCI USA is currently generating about 0.14 per unit of volatility. If you would invest 11,991 in iShares MSCI USA on August 28, 2024 and sell it today you would earn a total of 524.00 from holding iShares MSCI USA or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Euro vs. iShares MSCI USA
Performance |
| Timeline |
| ProShares Ultra Euro |
| iShares MSCI USA |
ProShares Ultra and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and IShares MSCI
The main advantage of trading using opposite ProShares Ultra and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind ProShares Ultra Euro and iShares MSCI USA 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.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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