Correlation Between ProShares UltraShort and IShares Russell

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Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and IShares Russell 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 Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SP500 and IShares Russell 2000, you can compare the effects of market volatilities on ProShares UltraShort and IShares Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and IShares Russell.

Diversification Opportunities for ProShares UltraShort and IShares Russell

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ProShares and IShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and IShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Russell 2000 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 SP500 are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Russell 2000 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IShares Russell go up and down completely randomly.

Pair Corralation between ProShares UltraShort and IShares Russell

Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to under-perform the IShares Russell. In addition to that, ProShares UltraShort is 1.19 times more volatile than IShares Russell 2000. It trades about -0.22 of its total potential returns per unit of risk. IShares Russell 2000 is currently generating about 0.14 per unit of volatility. If you would invest  20,348  in IShares Russell 2000 on December 29, 2023 and sell it today you would earn a total of  616.00  from holding IShares Russell 2000 or generate 3.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ProShares UltraShort SP500  vs.  IShares Russell 2000

 Performance 
       Timeline  
ProShares UltraShort 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ProShares UltraShort SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.
IShares Russell 2000 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Russell 2000 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ProShares UltraShort and IShares Russell Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares UltraShort and IShares Russell

The main advantage of trading using opposite ProShares UltraShort and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.
The idea behind ProShares UltraShort SP500 and IShares Russell 2000 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.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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