Correlation Between ProShares UltraShort and IShares Core

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

Diversification Opportunities for ProShares UltraShort and IShares Core

-0.67

Correlation Coefficient

ProShares UltraShort  IShares Core

Excellent diversification

The 3 months correlation between ProShares and IShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IShares Core go up and down completely randomly.

Pair Corralation between ProShares UltraShort and IShares Core

Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 2.03 times more return on investment than IShares Core. However, ProShares UltraShort is 2.03 times more volatile than iShares Core MSCI. It trades about 0.07 of its potential returns per unit of risk. iShares Core MSCI is currently generating about -0.15 per unit of risk. If you would invest  3,069  in ProShares UltraShort 20 on August 30, 2024 and sell it today you would earn a total of  231.00  from holding ProShares UltraShort 20 or generate 7.53% return on investment over 90 days.

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

ProShares UltraShort 20  vs.  iShares Core MSCI

ProShares UltraShort

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with ProShares UltraShort and IShares Core

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

The idea behind ProShares UltraShort 20 and iShares Core MSCI 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.