Correlation Between Barclays ETN and ProShares UltraShort

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

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

Diversification Opportunities for Barclays ETN and ProShares UltraShort

-0.47

Correlation Coefficient

Barclays ETN  ProShares UltraShort

Very good diversification

The 3 months correlation between Barclays and ProShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and ProShares UltraShort Semicondu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Barclays ETN 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 Barclays ETN Select 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 Barclays ETN i.e., Barclays ETN and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Barclays ETN and ProShares UltraShort

Given the investment horizon of 90 days Barclays ETN Select is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, Barclays ETN Select is 2.6 times less risky than ProShares UltraShort. The etf trades about -0.11 of its potential returns per unit of risk. The ProShares UltraShort Semiconductors is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,778  in ProShares UltraShort Semiconductors on September 21, 2024 and sell it today you would earn a total of  3.00  from holding ProShares UltraShort Semiconductors or generate 0.11% return on investment over 90 days.

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

Barclays ETN Select  vs.  ProShares UltraShort Semicondu

Barclays ETN Select

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Barclays ETN and ProShares UltraShort

The main advantage of trading using opposite Barclays ETN and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN 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 Barclays ETN Select and ProShares UltraShort Semiconductors 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.