Correlation Between ProShares UltraShort and ProShares Trust

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

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

Diversification Opportunities for ProShares UltraShort and ProShares Trust

-0.47

Correlation Coefficient

ProShares UltraShort  ProShares Trust

Very good diversification

The 3 months correlation between ProShares and ProShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Euro and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 Euro are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Trust go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ProShares Trust

Considering the 90-day investment horizon ProShares UltraShort Euro is expected to generate 0.25 times more return on investment than ProShares Trust. However, ProShares UltraShort Euro is 3.93 times less risky than ProShares Trust. It trades about 0.03 of its potential returns per unit of risk. ProShares Trust is currently generating about -0.09 per unit of risk. If you would invest  3,042  in ProShares UltraShort Euro on November 19, 2024 and sell it today you would earn a total of  366.00  from holding ProShares UltraShort Euro or generate 12.03% return on investment over 90 days.

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

ProShares UltraShort Euro  vs.  ProShares Trust

ProShares UltraShort Euro

Risk-Adjusted Performance

Insignificant

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

ProShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ProShares Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares UltraShort and ProShares Trust

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

The idea behind ProShares UltraShort Euro and ProShares Trust 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.