Correlation Between ProShares UltraShort and Janus Asia

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

By analyzing existing cross correlation between ProShares UltraShort SP500 and Janus Asia Equity, you can compare the effects of market volatilities on ProShares UltraShort and Janus Asia 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 Janus Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Janus Asia.

Diversification Opportunities for ProShares UltraShort and Janus Asia

-0.89

Correlation Coefficient

ProShares UltraShort  Janus Asia

Pay attention - limited upside

The 3 months correlation between ProShares and Janus is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and Janus Asia Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Asia Equity 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 SP500 are associated (or correlated) with Janus Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Asia Equity has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Janus Asia go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Janus Asia

Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to generate 1.56 times more return on investment than Janus Asia. However, ProShares UltraShort is 1.56 times more volatile than Janus Asia Equity. It trades about 0.32 of its potential returns per unit of risk. Janus Asia Equity is currently generating about -0.18 per unit of risk. If you would invest  2,502  in ProShares UltraShort SP500 on January 20, 2024 and sell it today you would earn a total of  239.00  from holding ProShares UltraShort SP500 or generate 9.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

ProShares UltraShort SP500  vs.  Janus Asia Equity

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 comparatively stable fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Janus Asia Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Asia Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Janus Asia 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 Janus Asia

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

The idea behind ProShares UltraShort SP500 and Janus Asia Equity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.