Correlation Between ProShares Ultra and IShares California

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

By analyzing existing cross correlation between ProShares Ultra Semiconductors and iShares California Muni, you can compare the effects of market volatilities on ProShares Ultra and IShares California 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 Ultra with a short position of IShares California. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and IShares California.

Diversification Opportunities for ProShares Ultra and IShares California

-0.48

Correlation Coefficient

ProShares Ultra  IShares California

Very good diversification

The 3 months correlation between ProShares and IShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and iShares California Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares California Muni and ProShares Ultra 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 Ultra Semiconductors are associated (or correlated) with IShares California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares California Muni has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IShares California go up and down completely randomly.

Pair Corralation between ProShares Ultra and IShares California

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 14.81 times more return on investment than IShares California. However, ProShares Ultra is 14.81 times more volatile than iShares California Muni. It trades about 0.11 of its potential returns per unit of risk. iShares California Muni is currently generating about 0.06 per unit of risk. If you would invest  4,938  in ProShares Ultra Semiconductors on September 2, 2024 and sell it today you would earn a total of  1,362  from holding ProShares Ultra Semiconductors or generate 27.58% return on investment over 90 days.

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

ProShares Ultra Semiconductors  vs.  iShares California Muni

ProShares Ultra Semi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

iShares California Muni

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares California Muni are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, IShares California is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares Ultra and IShares California

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

The idea behind ProShares Ultra Semiconductors and iShares California Muni 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.