Correlation Between ProShares UltraShort and AdvisorShares
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and AdvisorShares 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 AdvisorShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Utilities and AdvisorShares, you can compare the effects of market volatilities on ProShares UltraShort and AdvisorShares 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 AdvisorShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and AdvisorShares.
Diversification Opportunities for ProShares UltraShort and AdvisorShares
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ProShares and AdvisorShares is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Utilities and AdvisorShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares 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 Utilities are associated (or correlated) with AdvisorShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and AdvisorShares go up and down completely randomly.
Pair Corralation between ProShares UltraShort and AdvisorShares
Considering the 90-day investment horizon ProShares UltraShort Utilities is expected to generate 0.24 times more return on investment than AdvisorShares. However, ProShares UltraShort Utilities is 4.14 times less risky than AdvisorShares. It trades about 0.02 of its potential returns per unit of risk. AdvisorShares is currently generating about -0.08 per unit of risk. If you would invest 1,068 in ProShares UltraShort Utilities on January 25, 2024 and sell it today you would earn a total of 64.00 from holding ProShares UltraShort Utilities or generate 5.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 53.04% |
| Values | Daily Returns |
ProShares UltraShort Utilities vs. AdvisorShares
Performance |
| Timeline |
| ProShares UltraShort |
| AdvisorShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ProShares UltraShort and AdvisorShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and AdvisorShares
The main advantage of trading using opposite ProShares UltraShort and AdvisorShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, AdvisorShares 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 AdvisorShares will offset losses from the drop in AdvisorShares' long position.The idea behind ProShares UltraShort Utilities and AdvisorShares 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.| AdvisorShares vs. First Trust RiverFront | AdvisorShares vs. First Trust RiverFront | AdvisorShares vs. Arrow DWA Tactical | AdvisorShares vs. First Trust Developed |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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