Correlation Between United States and ProShares UltraShort

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

By analyzing existing cross correlation between United States Oil and ProShares UltraShort Bloomberg, you can compare the effects of market volatilities on United States and ProShares UltraShort 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 United States with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and ProShares UltraShort.

Diversification Opportunities for United States and ProShares UltraShort

-0.95

Correlation Coefficient

United States  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between United and ProShares is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding United States Oil and ProShares UltraShort Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and United States 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 United States Oil are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of United States i.e., United States and ProShares UltraShort go up and down completely randomly.

Pair Corralation between United States and ProShares UltraShort

Considering the 90-day investment horizon United States Oil is expected to generate 0.61 times more return on investment than ProShares UltraShort. However, United States Oil is 1.65 times less risky than ProShares UltraShort. It trades about 0.05 of its potential returns per unit of risk. ProShares UltraShort Bloomberg is currently generating about -0.04 per unit of risk. If you would invest  6,984  in United States Oil on September 13, 2024 and sell it today you would earn a total of  349.00  from holding United States Oil or generate 5.0% return on investment over 90 days.

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

United States Oil  vs.  ProShares UltraShort Bloomberg

United States Oil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, United States is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Bloomberg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with United States and ProShares UltraShort

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

The idea behind United States Oil and ProShares UltraShort Bloomberg 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.