Correlation Between ProShares UltraShort and United States
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and United States 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 United States 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 United States Natural, you can compare the effects of market volatilities on ProShares UltraShort and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and United States.
Diversification Opportunities for ProShares UltraShort and United States
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and United is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and United States Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Natural 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Natural has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and United States go up and down completely randomly.
Pair Corralation between ProShares UltraShort and United States
Considering the 90-day investment horizon ProShares UltraShort Bloomberg is expected to generate 0.92 times more return on investment than United States. However, ProShares UltraShort Bloomberg is 1.09 times less risky than United States. It trades about -0.03 of its potential returns per unit of risk. United States Natural is currently generating about -0.07 per unit of risk. If you would invest 2,459 in ProShares UltraShort Bloomberg on January 25, 2024 and sell it today you would lose (898.00) from holding ProShares UltraShort Bloomberg or give up 36.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. United States Natural
Performance |
| Timeline |
| ProShares UltraShort |
| United States Natural |
ProShares UltraShort and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and United States
The main advantage of trading using opposite ProShares UltraShort and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.The idea behind ProShares UltraShort Bloomberg and United States Natural 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.| United States vs. United States Oil | United States vs. ProShares Ultra Bloomberg | United States vs. Invesco DB Agriculture | United States vs. VanEck Gold Miners |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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