Correlation Between ProShares UltraShort and IShares 7

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and IShares 7 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 7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares UltraShort Yen and iShares 7 10 Year, you can compare the effects of market volatilities on ProShares UltraShort and IShares 7 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 7. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and IShares 7.

Diversification Opportunities for ProShares UltraShort and IShares 7

-0.59

Correlation Coefficient

ProShares UltraShort  IShares 7

Excellent diversification

The 3 months correlation between ProShares and IShares is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and iShares 7 10 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 7 10 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 Yen are associated (or correlated) with IShares 7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 7 10 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IShares 7 go up and down completely randomly.

Pair Corralation between ProShares UltraShort and IShares 7

Considering the 90-day investment horizon ProShares UltraShort Yen is expected to generate 2.43 times more return on investment than IShares 7. However, ProShares UltraShort is 2.43 times more volatile than iShares 7 10 Year. It trades about 0.15 of its potential returns per unit of risk. iShares 7 10 Year is currently generating about 0.19 per unit of risk. If you would invest  8,635  in ProShares UltraShort Yen on March 8, 2024 and sell it today you would earn a total of  255.00  from holding ProShares UltraShort Yen or generate 2.95% return on investment over 90 days.

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

ProShares UltraShort Yen  vs.  iShares 7 10 Year

ProShares UltraShort Yen

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Yen are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares 7 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 7 10 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares 7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares UltraShort and IShares 7

The main advantage of trading using opposite ProShares UltraShort and IShares 7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, IShares 7 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 7 will offset losses from the drop in IShares 7's long position.

The idea behind ProShares UltraShort Yen and iShares 7 10 Year 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.