Correlation Between ProShares Ultra and IShares Ultra

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

By analyzing existing cross correlation between ProShares Ultra QQQ and iShares Ultra Short Term, you can compare the effects of market volatilities on ProShares Ultra and IShares Ultra 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 Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and IShares Ultra.

Diversification Opportunities for ProShares Ultra and IShares Ultra

0.25

Correlation Coefficient

ProShares Ultra  IShares Ultra

Modest diversification

The 3 months correlation between ProShares and IShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra QQQ and iShares Ultra Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Ultra Short 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 QQQ are associated (or correlated) with IShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Ultra Short has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IShares Ultra go up and down completely randomly.

Pair Corralation between ProShares Ultra and IShares Ultra

Considering the 90-day investment horizon ProShares Ultra is expected to generate 1.85 times less return on investment than IShares Ultra. In addition to that, ProShares Ultra is 24.27 times more volatile than iShares Ultra Short Term. It trades about 0.0 of its total potential returns per unit of risk. iShares Ultra Short Term is currently generating about 0.21 per unit of volatility. If you would invest  4,989  in iShares Ultra Short Term on January 26, 2024 and sell it today you would earn a total of  57.00  from holding iShares Ultra Short Term or generate 1.14% return on investment over 90 days.

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

ProShares Ultra QQQ  vs.  iShares Ultra Short Term

ProShares Ultra QQQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra QQQ 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Ultra Short

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Ultra Short Term are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Ultra is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Ultra and IShares Ultra

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

The idea behind ProShares Ultra QQQ and iShares Ultra Short Term 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.