Correlation Between ProShares UltraShort and GraniteShares

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

By analyzing existing cross correlation between ProShares UltraShort SP500 and GraniteShares 1x Short, you can compare the effects of market volatilities on ProShares UltraShort and GraniteShares 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 GraniteShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and GraniteShares.

Diversification Opportunities for ProShares UltraShort and GraniteShares

0.67

Correlation Coefficient

ProShares UltraShort  GraniteShares

Poor diversification

The 3 months correlation between ProShares and GraniteShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and GraniteShares 1x Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 1x Short 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 SP500 are associated (or correlated) with GraniteShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares 1x Short has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and GraniteShares go up and down completely randomly.

Pair Corralation between ProShares UltraShort and GraniteShares

Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to generate 0.21 times more return on investment than GraniteShares. However, ProShares UltraShort SP500 is 4.69 times less risky than GraniteShares. It trades about -0.16 of its potential returns per unit of risk. GraniteShares 1x Short is currently generating about -0.18 per unit of risk. If you would invest  2,228  in ProShares UltraShort SP500 on September 3, 2024 and sell it today you would lose (325.00) from holding ProShares UltraShort SP500 or give up 14.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

ProShares UltraShort SP500  vs.  GraniteShares 1x Short

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

GraniteShares 1x Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GraniteShares 1x Short has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with ProShares UltraShort and GraniteShares

The main advantage of trading using opposite ProShares UltraShort and GraniteShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, GraniteShares 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 GraniteShares will offset losses from the drop in GraniteShares' long position.

The idea behind ProShares UltraShort SP500 and GraniteShares 1x Short 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.