Correlation Between IShares SPTSX and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and ProShares UltraShort 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 IShares SPTSX and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX 60 and ProShares UltraShort SP500, you can compare the effects of market volatilities on IShares SPTSX and ProShares UltraShort 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 IShares SPTSX with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and ProShares UltraShort.
Diversification Opportunities for IShares SPTSX and ProShares UltraShort
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IShares and ProShares is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and IShares SPTSX 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 iShares SPTSX 60 are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and ProShares UltraShort go up and down completely randomly.
Pair Corralation between IShares SPTSX and ProShares UltraShort
Assuming the 90 days trading horizon iShares SPTSX 60 is expected to generate 0.37 times more return on investment than ProShares UltraShort. However, iShares SPTSX 60 is 2.67 times less risky than ProShares UltraShort. It trades about 0.03 of its potential returns per unit of risk. ProShares UltraShort SP500 is currently generating about -0.02 per unit of risk. If you would invest 2,983 in iShares SPTSX 60 on January 20, 2024 and sell it today you would earn a total of 331.00 from holding iShares SPTSX 60 or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
iShares SPTSX 60 vs. ProShares UltraShort SP500
Performance |
| Timeline |
| iShares SPTSX 60 |
| ProShares UltraShort |
IShares SPTSX and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and ProShares UltraShort
The main advantage of trading using opposite IShares SPTSX and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.The idea behind iShares SPTSX 60 and ProShares UltraShort SP500 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.| ProShares UltraShort vs. ProShares Ultra SP500 | ProShares UltraShort vs. HUMANA INC | ProShares UltraShort vs. Aquagold International | ProShares UltraShort vs. Thrivent High Yield |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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