Correlation Between Invesco CurrencyShares and ProShares UltraShort

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

By analyzing existing cross correlation between Invesco CurrencyShares Japanese and ProShares UltraShort 20, you can compare the effects of market volatilities on Invesco CurrencyShares 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 Invesco CurrencyShares with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and ProShares UltraShort.

Diversification Opportunities for Invesco CurrencyShares and ProShares UltraShort

-0.98

Correlation Coefficient

Invesco CurrencyShares  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between Invesco and ProShares is -0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and ProShares UltraShort 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Invesco CurrencyShares 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 Invesco CurrencyShares Japanese 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 Invesco CurrencyShares i.e., Invesco CurrencyShares and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and ProShares UltraShort

Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, Invesco CurrencyShares Japanese is 2.34 times less risky than ProShares UltraShort. The etf trades about -0.09 of its potential returns per unit of risk. The ProShares UltraShort 20 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,871  in ProShares UltraShort 20 on September 5, 2024 and sell it today you would earn a total of  405.00  from holding ProShares UltraShort 20 or generate 14.11% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  ProShares UltraShort 20

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco CurrencyShares Japanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ProShares UltraShort

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco CurrencyShares and ProShares UltraShort

The main advantage of trading using opposite Invesco CurrencyShares and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares 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 Invesco CurrencyShares Japanese and ProShares UltraShort 20 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.