Correlation Between Barclays ETN and ProShares UltraShort

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

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

Diversification Opportunities for Barclays ETN and ProShares UltraShort

-0.34

Correlation Coefficient

Barclays ETN  ProShares UltraShort

Very good diversification

The 3 months correlation between Barclays and ProShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Barclays ETN 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 Barclays ETN Select 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 Barclays ETN i.e., Barclays ETN and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Barclays ETN and ProShares UltraShort

Given the investment horizon of 90 days Barclays ETN Select is expected to generate 0.47 times more return on investment than ProShares UltraShort. However, Barclays ETN Select is 2.14 times less risky than ProShares UltraShort. It trades about 0.19 of its potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about -0.01 per unit of risk. If you would invest  2,544  in Barclays ETN Select on September 12, 2024 and sell it today you would earn a total of  306.00  from holding Barclays ETN Select or generate 12.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Barclays ETN Select  vs.  ProShares UltraShort Utilities

Barclays ETN Select

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Barclays ETN and ProShares UltraShort

The main advantage of trading using opposite Barclays ETN and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN 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 Barclays ETN Select and ProShares UltraShort Utilities 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.