Correlation Between ProShares UltraShort and Invesco BulletShares

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Invesco BulletShares 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 Invesco BulletShares 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 Invesco BulletShares 2028, you can compare the effects of market volatilities on ProShares UltraShort and Invesco BulletShares 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 Invesco BulletShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Invesco BulletShares.

Diversification Opportunities for ProShares UltraShort and Invesco BulletShares

-0.87

Correlation Coefficient

ProShares UltraShort  Invesco BulletShares

Pay attention - limited upside

The 3 months correlation between ProShares and Invesco is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and Invesco BulletShares 2028 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco BulletShares 2028 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 Invesco BulletShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco BulletShares 2028 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Invesco BulletShares go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Invesco BulletShares

Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 9.52 times more return on investment than Invesco BulletShares. However, ProShares UltraShort is 9.52 times more volatile than Invesco BulletShares 2028. It trades about 0.08 of its potential returns per unit of risk. Invesco BulletShares 2028 is currently generating about 0.03 per unit of risk. If you would invest  2,977  in ProShares UltraShort 20 on September 3, 2024 and sell it today you would earn a total of  237.00  from holding ProShares UltraShort 20 or generate 7.96% return on investment over 90 days.

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

ProShares UltraShort 20  vs.  Invesco BulletShares 2028

ProShares UltraShort

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 6 (%) 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 January 2025.

Invesco BulletShares 2028

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BulletShares 2028 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Invesco BulletShares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares UltraShort and Invesco BulletShares

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

The idea behind ProShares UltraShort 20 and Invesco BulletShares 2028 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.