Correlation Between ProShares UltraShort and Energy Select
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Energy Select 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 Energy Select 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 Energy Select Sector, you can compare the effects of market volatilities on ProShares UltraShort and Energy Select 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 Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Energy Select.
Diversification Opportunities for ProShares UltraShort and Energy Select
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and Energy is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Utilities and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector 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 Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Energy Select go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Energy Select
Considering the 90-day investment horizon ProShares UltraShort Utilities is expected to under-perform the Energy Select. In addition to that, ProShares UltraShort is 2.63 times more volatile than Energy Select Sector. It trades about -0.09 of its total potential returns per unit of risk. Energy Select Sector is currently generating about 0.17 per unit of volatility. If you would invest 9,205 in Energy Select Sector on January 20, 2024 and sell it today you would earn a total of 292.00 from holding Energy Select Sector or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ProShares UltraShort Utilities vs. Energy Select Sector
Performance |
| Timeline |
| ProShares UltraShort |
| Energy Select Sector |
ProShares UltraShort and Energy Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Energy Select
The main advantage of trading using opposite ProShares UltraShort and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Energy Select 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 Energy Select will offset losses from the drop in Energy Select's long position.| ProShares UltraShort vs. ProShares Ultra SP500 | ProShares UltraShort vs. HUMANA INC | ProShares UltraShort vs. Aquagold International | ProShares UltraShort vs. Thrivent High Yield |
| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy Select vs. Utilities Select Sector |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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