Correlation Between ProShares UltraShort and Technology Select
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Technology 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 Technology 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 Technology Select Sector, you can compare the effects of market volatilities on ProShares UltraShort and Technology 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Technology Select.
Diversification Opportunities for ProShares UltraShort and Technology Select
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between ProShares and Technology is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Utilities and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Technology Select go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Technology Select
Considering the 90-day investment horizon ProShares UltraShort Utilities is expected to under-perform the Technology Select. In addition to that, ProShares UltraShort is 1.94 times more volatile than Technology Select Sector. It trades about -0.13 of its total potential returns per unit of risk. Technology Select Sector is currently generating about -0.22 per unit of volatility. If you would invest 20,852 in Technology Select Sector on January 25, 2024 and sell it today you would lose (1,139) from holding Technology Select Sector or give up 5.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ProShares UltraShort Utilities vs. Technology Select Sector
Performance |
| Timeline |
| ProShares UltraShort |
| Technology Select Sector |
ProShares UltraShort and Technology Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Technology Select
The main advantage of trading using opposite ProShares UltraShort and Technology Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Technology 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 Technology Select will offset losses from the drop in Technology Select's long position.The idea behind ProShares UltraShort Utilities and Technology Select Sector 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.| Technology Select vs. OShares Quality Dividend | Technology Select vs. Aquagold International | Technology Select vs. Morningstar Unconstrained Allocation | Technology Select vs. High Yield Municipal Fund |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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