Correlation Between ProShares Ultra and IShares Convertible

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Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and IShares Convertible 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 Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Ultra Euro and iShares Convertible Bond, you can compare the effects of market volatilities on ProShares Ultra and IShares Convertible 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 Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and IShares Convertible.

Diversification Opportunities for ProShares Ultra and IShares Convertible

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between ProShares and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond 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 Euro are associated (or correlated) with IShares Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IShares Convertible go up and down completely randomly.

Pair Corralation between ProShares Ultra and IShares Convertible

Considering the 90-day investment horizon ProShares Ultra Euro is expected to under-perform the IShares Convertible. In addition to that, ProShares Ultra is 1.86 times more volatile than iShares Convertible Bond. It trades about -0.17 of its total potential returns per unit of risk. iShares Convertible Bond is currently generating about -0.02 per unit of volatility. If you would invest  7,821  in iShares Convertible Bond on March 24, 2024 and sell it today you would lose (12.00) from holding iShares Convertible Bond or give up 0.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Ultra Euro  vs.  iShares Convertible Bond

 Performance 
       Timeline  
ProShares Ultra Euro 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares Ultra Euro 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.
iShares Convertible Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares Convertible Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Convertible is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ProShares Ultra and IShares Convertible Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Ultra and IShares Convertible

The main advantage of trading using opposite ProShares Ultra and IShares Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, IShares Convertible 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 Convertible will offset losses from the drop in IShares Convertible's long position.
The idea behind ProShares Ultra Euro and iShares Convertible Bond 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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