Correlation Between ProShares Ultra and IShares Currency

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and IShares Currency 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 Ultra and IShares Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares Ultra Euro and iShares Currency Hedged, you can compare the effects of market volatilities on ProShares Ultra and IShares Currency 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 Ultra with a short position of IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and IShares Currency.

Diversification Opportunities for ProShares Ultra and IShares Currency

-0.02

Correlation Coefficient

ProShares Ultra  IShares Currency

Good diversification

The 3 months correlation between ProShares and IShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged and ProShares Ultra 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 Ultra Euro are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IShares Currency go up and down completely randomly.

Pair Corralation between ProShares Ultra and IShares Currency

Considering the 90-day investment horizon ProShares Ultra Euro is expected to under-perform the IShares Currency. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra Euro is 1.28 times less risky than IShares Currency. The etf trades about -0.03 of its potential returns per unit of risk. The iShares Currency Hedged is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,150  in iShares Currency Hedged on January 29, 2024 and sell it today you would lose (2.00) from holding iShares Currency Hedged or give up 0.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ProShares Ultra Euro  vs.  iShares Currency Hedged

ProShares Ultra Euro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Euro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Currency Hedged

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Currency Hedged are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IShares Currency may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ProShares Ultra and IShares Currency

The main advantage of trading using opposite ProShares Ultra and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, IShares Currency 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 Currency will offset losses from the drop in IShares Currency's long position.

The idea behind ProShares Ultra Euro and iShares Currency Hedged 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.