Correlation Between ProShares Short and ProShares UltraShort

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

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

Diversification Opportunities for ProShares Short and ProShares UltraShort

0.56

Correlation Coefficient

ProShares Short  ProShares UltraShort

Very weak diversification

The 3 months correlation between ProShares and ProShares is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short MSCI and ProShares UltraShort Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Euro and ProShares Short 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 Short MSCI 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 Euro has no effect on the direction of ProShares Short i.e., ProShares Short and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ProShares Short and ProShares UltraShort

Considering the 90-day investment horizon ProShares Short MSCI is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Short MSCI is 1.22 times less risky than ProShares UltraShort. The etf trades about -0.01 of its potential returns per unit of risk. The ProShares UltraShort Euro is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,324  in ProShares UltraShort Euro on September 17, 2024 and sell it today you would earn a total of  68.00  from holding ProShares UltraShort Euro or generate 2.05% return on investment over 90 days.

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

ProShares Short MSCI  vs.  ProShares UltraShort Euro

ProShares Short MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

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

ProShares UltraShort Euro

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Euro are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares Short and ProShares UltraShort

The main advantage of trading using opposite ProShares Short and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short 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 ProShares Short MSCI and ProShares UltraShort Euro 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.