Correlation Between ProShares UltraShort and VanEck Inflation

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Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and VanEck Inflation 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 VanEck Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SmallCap600 and VanEck Inflation Allocation, you can compare the effects of market volatilities on ProShares UltraShort and VanEck Inflation 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 VanEck Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and VanEck Inflation.

Diversification Opportunities for ProShares UltraShort and VanEck Inflation

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between ProShares and VanEck is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SmallCap6 and VanEck Inflation Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Inflation All 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 SmallCap600 are associated (or correlated) with VanEck Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Inflation All has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and VanEck Inflation go up and down completely randomly.

Pair Corralation between ProShares UltraShort and VanEck Inflation

Considering the 90-day investment horizon ProShares UltraShort SmallCap600 is expected to under-perform the VanEck Inflation. In addition to that, ProShares UltraShort is 2.95 times more volatile than VanEck Inflation Allocation. It trades about -0.04 of its total potential returns per unit of risk. VanEck Inflation Allocation is currently generating about 0.07 per unit of volatility. If you would invest  2,506  in VanEck Inflation Allocation on December 29, 2023 and sell it today you would earn a total of  204.00  from holding VanEck Inflation Allocation or generate 8.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ProShares UltraShort SmallCap6  vs.  VanEck Inflation Allocation

 Performance 
       Timeline  
ProShares UltraShort 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ProShares UltraShort SmallCap600 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
VanEck Inflation All 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Inflation Allocation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, VanEck Inflation is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ProShares UltraShort and VanEck Inflation Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares UltraShort and VanEck Inflation

The main advantage of trading using opposite ProShares UltraShort and VanEck Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, VanEck Inflation 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 VanEck Inflation will offset losses from the drop in VanEck Inflation's long position.
The idea behind ProShares UltraShort SmallCap600 and VanEck Inflation Allocation 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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