Correlation Between ProShares UltraShort and Invesco DB
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Invesco DB 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 Invesco DB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Bloomberg and Invesco DB Energy, you can compare the effects of market volatilities on ProShares UltraShort and Invesco DB 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 Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Invesco DB.
Diversification Opportunities for ProShares UltraShort and Invesco DB
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ProShares and Invesco is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and Invesco DB Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Energy 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 Bloomberg are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Energy has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Invesco DB go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Invesco DB
Given the investment horizon of 90 days ProShares UltraShort Bloomberg is expected to generate 15.43 times more return on investment than Invesco DB. However, ProShares UltraShort is 15.43 times more volatile than Invesco DB Energy. It trades about 0.11 of its potential returns per unit of risk. Invesco DB Energy is currently generating about 0.11 per unit of risk. If you would invest 4,918 in ProShares UltraShort Bloomberg on January 19, 2024 and sell it today you would earn a total of 2,382 from holding ProShares UltraShort Bloomberg or generate 48.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. Invesco DB Energy
Performance |
| Timeline |
| ProShares UltraShort |
| Invesco DB Energy |
ProShares UltraShort and Invesco DB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Invesco DB
The main advantage of trading using opposite ProShares UltraShort and Invesco DB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Invesco DB 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 Invesco DB will offset losses from the drop in Invesco DB's long position.| ProShares UltraShort vs. MicroSectors Gold Miners | ProShares UltraShort vs. DB Gold Double | ProShares UltraShort vs. DB Gold Short |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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