Correlation Between ProShares UltraShort and T Rex

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

By analyzing existing cross correlation between ProShares UltraShort Euro and T Rex 2X Inverse, you can compare the effects of market volatilities on ProShares UltraShort and T Rex 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 T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and T Rex.

Diversification Opportunities for ProShares UltraShort and T Rex

-0.81

Correlation Coefficient

ProShares UltraShort  T Rex

Pay attention - limited upside

The 3 months correlation between ProShares and BTCZ is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Euro and T Rex 2X Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X 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 Euro are associated (or correlated) with T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and T Rex go up and down completely randomly.

Pair Corralation between ProShares UltraShort and T Rex

Considering the 90-day investment horizon ProShares UltraShort Euro is expected to generate 0.13 times more return on investment than T Rex. However, ProShares UltraShort Euro is 7.49 times less risky than T Rex. It trades about 0.18 of its potential returns per unit of risk. T Rex 2X Inverse is currently generating about -0.24 per unit of risk. If you would invest  3,019  in ProShares UltraShort Euro on August 30, 2024 and sell it today you would earn a total of  322.00  from holding ProShares UltraShort Euro or generate 10.67% return on investment over 90 days.

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

ProShares UltraShort Euro  vs.  T Rex 2X Inverse

ProShares UltraShort Euro

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days ProShares UltraShort Euro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in December 2024.

T Rex 2X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rex 2X Inverse has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with ProShares UltraShort and T Rex

The main advantage of trading using opposite ProShares UltraShort and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, T Rex 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 T Rex will offset losses from the drop in T Rex's long position.

The idea behind ProShares UltraShort Euro and T Rex 2X Inverse 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.