Correlation Between ProShares UltraShort and ProShares Short
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and ProShares Short 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 ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SmallCap600 and ProShares Short Dow30, you can compare the effects of market volatilities on ProShares UltraShort and ProShares Short 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 ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares Short.
Diversification Opportunities for ProShares UltraShort and ProShares Short
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and ProShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SmallCap6 and ProShares Short Dow30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short Dow30 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 SmallCap600 are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short Dow30 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Short go up and down completely randomly.
Pair Corralation between ProShares UltraShort and ProShares Short
Considering the 90-day investment horizon ProShares UltraShort SmallCap600 is expected to under-perform the ProShares Short. In addition to that, ProShares UltraShort is 4.25 times more volatile than ProShares Short Dow30. It trades about -0.04 of its total potential returns per unit of risk. ProShares Short Dow30 is currently generating about -0.1 per unit of volatility. If you would invest 3,236 in ProShares Short Dow30 on January 24, 2024 and sell it today you would lose (277.00) from holding ProShares Short Dow30 or give up 8.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort SmallCap6 vs. ProShares Short Dow30
Performance |
| Timeline |
| ProShares UltraShort |
| ProShares Short Dow30 |
ProShares UltraShort and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and ProShares Short
The main advantage of trading using opposite ProShares UltraShort and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short's long position.The idea behind ProShares UltraShort SmallCap600 and ProShares Short Dow30 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |