Correlation Between ProShares UltraShort and American Century

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

By analyzing existing cross correlation between ProShares UltraShort 20 and American Century Investments, you can compare the effects of market volatilities on ProShares UltraShort and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and American Century.

Diversification Opportunities for ProShares UltraShort and American Century

0.87

Correlation Coefficient

ProShares UltraShort  American Century

Very poor diversification

The 3 months correlation between ProShares and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and American Century Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Inv 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 20 are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Inv has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and American Century go up and down completely randomly.

Pair Corralation between ProShares UltraShort and American Century

Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 6.31 times more return on investment than American Century. However, ProShares UltraShort is 6.31 times more volatile than American Century Investments. It trades about 0.1 of its potential returns per unit of risk. American Century Investments is currently generating about -0.02 per unit of risk. If you would invest  2,977  in ProShares UltraShort 20 on August 31, 2024 and sell it today you would earn a total of  323.00  from holding ProShares UltraShort 20 or generate 10.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	39.68%
Values	Daily Returns

ProShares UltraShort 20  vs.  American Century Investments

ProShares UltraShort

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in December 2024.

American Century Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraShort and American Century

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

The idea behind ProShares UltraShort 20 and American Century Investments 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.