Correlation Between ProShares UltraShort and Invesco Exchange

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

Diversification Opportunities for ProShares UltraShort and Invesco Exchange

-0.93

Correlation Coefficient

ProShares UltraShort  Invesco Exchange

Pay attention - limited upside

The 3 months correlation between ProShares and Invesco is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and Invesco Exchange Traded Self I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Exchange Traded 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 Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Exchange Traded has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Invesco Exchange go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Invesco Exchange

Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 5.02 times more return on investment than Invesco Exchange. However, ProShares UltraShort is 5.02 times more volatile than Invesco Exchange Traded Self Indexed. It trades about 0.09 of its potential returns per unit of risk. Invesco Exchange Traded Self Indexed is currently generating about 0.01 per unit of risk. If you would invest  2,977  in ProShares UltraShort 20 on September 2, 2024 and sell it today you would earn a total of  265.00  from holding ProShares UltraShort 20 or generate 8.9% 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 Exchange Traded Self I

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 Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Exchange Traded Self Indexed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco Exchange is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ProShares UltraShort and Invesco Exchange

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

The idea behind ProShares UltraShort 20 and Invesco Exchange Traded Self Indexed 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.