Correlation Between ProShares UltraShort and ProShares Decline

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

By analyzing existing cross correlation between ProShares UltraShort MSCI and ProShares Decline of, you can compare the effects of market volatilities on ProShares UltraShort and ProShares Decline 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 ProShares Decline. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares Decline.

Diversification Opportunities for ProShares UltraShort and ProShares Decline

-0.32

Correlation Coefficient

ProShares UltraShort  ProShares Decline

Very good diversification

The 3 months correlation between ProShares and ProShares is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort MSCI and ProShares Decline of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Decline 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 MSCI are associated (or correlated) with ProShares Decline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Decline has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Decline go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ProShares Decline

Considering the 90-day investment horizon ProShares UltraShort MSCI is expected to generate 1.51 times more return on investment than ProShares Decline. However, ProShares UltraShort is 1.51 times more volatile than ProShares Decline of. It trades about 0.09 of its potential returns per unit of risk. ProShares Decline of is currently generating about -0.06 per unit of risk. If you would invest  1,412  in ProShares UltraShort MSCI on September 17, 2024 and sell it today you would earn a total of  122.00  from holding ProShares UltraShort MSCI or generate 8.64% return on investment over 90 days.

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

ProShares UltraShort MSCI  vs.  ProShares Decline of

ProShares UltraShort MSCI

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort MSCI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares Decline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Decline of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ProShares Decline is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraShort and ProShares Decline

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

The idea behind ProShares UltraShort MSCI and ProShares Decline of 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.