Correlation Between IShares Core and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both IShares Core and ProShares UltraShort 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 IShares Core and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Core SP and ProShares UltraShort MSCI, you can compare the effects of market volatilities on IShares Core and ProShares UltraShort 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 IShares Core with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and ProShares UltraShort.

Diversification Opportunities for IShares Core and ProShares UltraShort

-0.81

Correlation Coefficient

IShares Core  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between IShares and ProShares is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and ProShares UltraShort MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort MSCI and IShares Core 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 iShares Core SP are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort MSCI has no effect on the direction of IShares Core i.e., IShares Core and ProShares UltraShort go up and down completely randomly.

Pair Corralation between IShares Core and ProShares UltraShort

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.44 times more return on investment than ProShares UltraShort. However, iShares Core SP is 2.26 times less risky than ProShares UltraShort. It trades about 0.02 of its potential returns per unit of risk. ProShares UltraShort MSCI is currently generating about -0.1 per unit of risk. If you would invest  51,071  in iShares Core SP on February 5, 2024 and sell it today you would earn a total of  313.00  from holding iShares Core SP or generate 0.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

iShares Core SP  vs.  ProShares UltraShort MSCI

iShares Core SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares UltraShort MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's technical and fundamental indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with IShares Core and ProShares UltraShort

The main advantage of trading using opposite IShares Core and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, ProShares UltraShort 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 UltraShort will offset losses from the drop in ProShares UltraShort's long position.

The idea behind iShares Core SP and ProShares UltraShort MSCI 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.