Correlation Between ProShares UltraShort and Health Care
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Health Care 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 Health Care 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 Health Care Select, you can compare the effects of market volatilities on ProShares UltraShort and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Health Care.
Diversification Opportunities for ProShares UltraShort and Health Care
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between ProShares and Health is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Utilities and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Health Care go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Health Care
Considering the 90-day investment horizon ProShares UltraShort Utilities is expected to under-perform the Health Care. In addition to that, ProShares UltraShort is 2.58 times more volatile than Health Care Select. It trades about -0.22 of its total potential returns per unit of risk. Health Care Select is currently generating about -0.19 per unit of volatility. If you would invest 14,577 in Health Care Select on January 26, 2024 and sell it today you would lose (491.00) from holding Health Care Select or give up 3.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Utilities vs. Health Care Select
Performance |
| Timeline |
| ProShares UltraShort |
| Health Care Select |
ProShares UltraShort and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Health Care
The main advantage of trading using opposite ProShares UltraShort and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.The idea behind ProShares UltraShort Utilities and Health Care Select 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.| Health Care vs. iShares Insurance ETF | Health Care vs. SCOR PK | Health Care vs. Morningstar Unconstrained Allocation | Health Care vs. SPACE |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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