Correlation Between ProShares UltraShort and Gabelli ETFs

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

Diversification Opportunities for ProShares UltraShort and Gabelli ETFs

0.7

Correlation Coefficient

ProShares UltraShort  Gabelli ETFs

Poor diversification

The 3 months correlation between ProShares and Gabelli is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and Gabelli ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli ETFs Trust 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 Gabelli ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli ETFs Trust has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Gabelli ETFs go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Gabelli ETFs

Considering the 90-day investment horizon ProShares UltraShort is expected to generate 1.11 times less return on investment than Gabelli ETFs. In addition to that, ProShares UltraShort is 1.66 times more volatile than Gabelli ETFs Trust. It trades about 0.09 of its total potential returns per unit of risk. Gabelli ETFs Trust is currently generating about 0.16 per unit of volatility. If you would invest  2,619  in Gabelli ETFs Trust on September 2, 2024 and sell it today you would earn a total of  280.00  from holding Gabelli ETFs Trust or generate 10.69% return on investment over 90 days.

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

ProShares UltraShort 20  vs.  Gabelli ETFs Trust

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.

Gabelli ETFs Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli ETFs Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Gabelli ETFs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares UltraShort and Gabelli ETFs

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

The idea behind ProShares UltraShort 20 and Gabelli ETFs Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.