Correlation Between ProShares UltraShort and ProShares UltraShort

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

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

Diversification Opportunities for ProShares UltraShort and ProShares UltraShort

-0.56

Correlation Coefficient

ProShares UltraShort  ProShares UltraShort

Excellent diversification

The 3 months correlation between ProShares and ProShares is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Oil and ProShares UltraShort MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort MSCI 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 Oil 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 MSCI has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ProShares UltraShort

Considering the 90-day investment horizon ProShares UltraShort Oil is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort Oil is 1.11 times less risky than ProShares UltraShort. The etf trades about -0.07 of its potential returns per unit of risk. The ProShares UltraShort MSCI is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,281  in ProShares UltraShort MSCI on September 12, 2024 and sell it today you would earn a total of  357.00  from holding ProShares UltraShort MSCI or generate 27.87% return on investment over 90 days.

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

ProShares UltraShort Oil  vs.  ProShares UltraShort MSCI

ProShares UltraShort Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

ProShares UltraShort MSCI

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort MSCI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, ProShares UltraShort reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraShort and ProShares UltraShort

The main advantage of trading using opposite ProShares UltraShort and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 ProShares UltraShort Oil and ProShares UltraShort MSCI 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.