Correlation Between ProShares UltraShort and Elbit Systems

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

By analyzing existing cross correlation between ProShares UltraShort Bloomberg and Elbit Systems, you can compare the effects of market volatilities on ProShares UltraShort and Elbit Systems 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 Elbit Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Elbit Systems.

Diversification Opportunities for ProShares UltraShort and Elbit Systems

-0.14

Correlation Coefficient

ProShares UltraShort  Elbit Systems

Good diversification

The 3 months correlation between ProShares and Elbit is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems 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 Bloomberg are associated (or correlated) with Elbit Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Systems has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Elbit Systems go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Elbit Systems

Given the investment horizon of 90 days ProShares UltraShort Bloomberg is expected to generate 12.8 times more return on investment than Elbit Systems. However, ProShares UltraShort is 12.8 times more volatile than Elbit Systems. It trades about 0.1 of its potential returns per unit of risk. Elbit Systems is currently generating about -0.13 per unit of risk. If you would invest  5,672  in ProShares UltraShort Bloomberg on February 3, 2024 and sell it today you would earn a total of  1,355  from holding ProShares UltraShort Bloomberg or generate 23.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

ProShares UltraShort Bloomberg  vs.  Elbit Systems

ProShares UltraShort

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Bloomberg are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, ProShares UltraShort exhibited solid returns over the last few months and may actually be approaching a breakup point.

Elbit Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elbit Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Elbit Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraShort and Elbit Systems

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

The idea behind ProShares UltraShort Bloomberg and Elbit Systems 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.