Correlation Between ProShares Ultra and IShares

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

By analyzing existing cross correlation between ProShares Ultra Semiconductors and IShares, you can compare the effects of market volatilities on ProShares Ultra and IShares 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and IShares.

Diversification Opportunities for ProShares Ultra and IShares

-0.34

Correlation Coefficient

ProShares Ultra  IShares

Very good diversification

The 3 months correlation between ProShares and IShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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 Semiconductors are associated (or correlated) with IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IShares go up and down completely randomly.

Pair Corralation between ProShares Ultra and IShares

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 5.09 times more return on investment than IShares. However, ProShares Ultra is 5.09 times more volatile than IShares. It trades about 0.01 of its potential returns per unit of risk. IShares is currently generating about -0.15 per unit of risk. If you would invest  6,724  in ProShares Ultra Semiconductors on September 21, 2024 and sell it today you would lose (556.00) from holding ProShares Ultra Semiconductors or give up 8.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	15.09%
Values	Daily Returns

ProShares Ultra Semiconductors  vs.  IShares

ProShares Ultra Semi

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and IShares

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

The idea behind ProShares Ultra Semiconductors and IShares 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.