Correlation Between ProShares UltraShort and IShares Biotechnology
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and IShares Biotechnology 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 IShares Biotechnology 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 iShares Biotechnology ETF, you can compare the effects of market volatilities on ProShares UltraShort and IShares Biotechnology 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 IShares Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and IShares Biotechnology.
Diversification Opportunities for ProShares UltraShort and IShares Biotechnology
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ProShares and IShares is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Utilities and iShares Biotechnology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Biotechnology ETF 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 IShares Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Biotechnology ETF has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IShares Biotechnology go up and down completely randomly.
Pair Corralation between ProShares UltraShort and IShares Biotechnology
Considering the 90-day investment horizon ProShares UltraShort Utilities is expected to under-perform the IShares Biotechnology. In addition to that, ProShares UltraShort is 1.81 times more volatile than iShares Biotechnology ETF. It trades about -0.13 of its total potential returns per unit of risk. iShares Biotechnology ETF is currently generating about -0.08 per unit of volatility. If you would invest 13,556 in iShares Biotechnology ETF on January 25, 2024 and sell it today you would lose (754.00) from holding iShares Biotechnology ETF or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Utilities vs. iShares Biotechnology ETF
Performance |
| Timeline |
| ProShares UltraShort |
| iShares Biotechnology ETF |
ProShares UltraShort and IShares Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and IShares Biotechnology
The main advantage of trading using opposite ProShares UltraShort and IShares Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, IShares Biotechnology 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 IShares Biotechnology will offset losses from the drop in IShares Biotechnology's long position.The idea behind ProShares UltraShort Utilities and iShares Biotechnology ETF 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.| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care | IShares Biotechnology vs. American Beacon GLG |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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