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 Oil, 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
-0.97 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and Invesco is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and Invesco DB Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Oil 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 Oil 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
Considering the 90-day investment horizon ProShares UltraShort Bloomberg is expected to under-perform the Invesco DB. In addition to that, ProShares UltraShort is 2.03 times more volatile than Invesco DB Oil. It trades about -0.1 of its total potential returns per unit of risk. Invesco DB Oil is currently generating about 0.12 per unit of volatility. If you would invest 1,545 in Invesco DB Oil on January 25, 2024 and sell it today you would earn a total of 29.00 from holding Invesco DB Oil or generate 1.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. Invesco DB Oil
Performance |
| Timeline |
| ProShares UltraShort |
| Invesco DB Oil |
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.The idea behind ProShares UltraShort Bloomberg and Invesco DB Oil 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.| Invesco DB vs. Invesco DB Energy | Invesco DB vs. United States 12 | Invesco DB vs. Invesco DB Base | Invesco DB vs. Invesco DB Precious |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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