Correlation Between ProShares Ultra and IShares ESG

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

Diversification Opportunities for ProShares Ultra and IShares ESG

-0.64

Correlation Coefficient

ProShares Ultra  IShares ESG

Excellent diversification

The 3 months correlation between ProShares and IShares is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and iShares ESG Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aggregate 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aggregate has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IShares ESG go up and down completely randomly.

Pair Corralation between ProShares Ultra and IShares ESG

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 14.78 times more return on investment than IShares ESG. However, ProShares Ultra is 14.78 times more volatile than iShares ESG Aggregate. It trades about 0.03 of its potential returns per unit of risk. iShares ESG Aggregate is currently generating about -0.03 per unit of risk. If you would invest  5,919  in ProShares Ultra Semiconductors on August 30, 2024 and sell it today you would earn a total of  158.00  from holding ProShares Ultra Semiconductors or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

ProShares Ultra Semiconductors  vs.  iShares ESG Aggregate

ProShares Ultra Semi

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares ESG Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares ESG 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 ESG

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

The idea behind ProShares Ultra Semiconductors and iShares ESG Aggregate 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.