Correlation Between IShares Core and ProShares UltraShort

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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 Bloomberg, 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

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between IShares and ProShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding IShares Core SP and ProShares UltraShort Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 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 0.3 times more return on investment than ProShares UltraShort. However, IShares Core SP is 3.34 times less risky than ProShares UltraShort. It trades about 0.04 of its potential returns per unit of risk. ProShares UltraShort Bloomberg is currently generating about -0.01 per unit of risk. If you would invest  43,551  in IShares Core SP on December 29, 2023 and sell it today you would earn a total of  9,022  from holding IShares Core SP or generate 20.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

IShares Core SP  vs.  ProShares UltraShort Bloomberg

 Performance 
       Timeline  
IShares Core SP 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Core SP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in April 2024.
ProShares UltraShort 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ProShares UltraShort Bloomberg 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

IShares Core and ProShares UltraShort Volatility Contrast

   Predicted Return Density   
       Returns  

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 Bloomberg 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.
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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