Correlation Between United States and ProShares UltraShort

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

By analyzing existing cross correlation between United States Copper and ProShares UltraShort SP500, you can compare the effects of market volatilities on United States 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 United States with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and ProShares UltraShort.

Diversification Opportunities for United States and ProShares UltraShort

-0.67

Correlation Coefficient

United States  ProShares UltraShort

Excellent diversification

The 3 months correlation between United and ProShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding United States Copper and ProShares UltraShort SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and United States 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 United States Copper 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 United States i.e., United States and ProShares UltraShort go up and down completely randomly.

Pair Corralation between United States and ProShares UltraShort

Given the investment horizon of 90 days United States is expected to generate 1.11 times less return on investment than ProShares UltraShort. But when comparing it to its historical volatility, United States Copper is 1.32 times less risky than ProShares UltraShort. It trades about 0.18 of its potential returns per unit of risk. ProShares UltraShort SP500 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,573  in ProShares UltraShort SP500 on January 16, 2024 and sell it today you would earn a total of  109.00  from holding ProShares UltraShort SP500 or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

United States Copper  vs.  ProShares UltraShort SP500

United States Copper

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Copper are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Etf's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with United States and ProShares UltraShort

The main advantage of trading using opposite United States and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Copper 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.