Correlation Between ProShares UltraShort and DB Gold

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and DB Gold 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 DB Gold 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 DB Gold Short, you can compare the effects of market volatilities on ProShares UltraShort and DB Gold 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 DB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and DB Gold.

Diversification Opportunities for ProShares UltraShort and DB Gold

0.06

Correlation Coefficient

ProShares UltraShort  DB Gold

Significant diversification

The 3 months correlation between ProShares and DGZ is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Euro and DB Gold Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Short 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 DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Short has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and DB Gold go up and down completely randomly.

Pair Corralation between ProShares UltraShort and DB Gold

Considering the 90-day investment horizon ProShares UltraShort Euro is expected to generate 0.62 times more return on investment than DB Gold. However, ProShares UltraShort Euro is 1.6 times less risky than DB Gold. It trades about 0.04 of its potential returns per unit of risk. DB Gold Short is currently generating about -0.02 per unit of risk. If you would invest  3,028  in ProShares UltraShort Euro on September 21, 2024 and sell it today you would earn a total of  444.00  from holding ProShares UltraShort Euro or generate 14.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

ProShares UltraShort Euro  vs.  DB Gold Short

ProShares UltraShort Euro

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Euro are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ProShares UltraShort displayed solid returns over the last few months and may actually be approaching a breakup point.

DB Gold Short

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DB Gold Short are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, DB Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraShort and DB Gold

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

The idea behind ProShares UltraShort Euro and DB Gold Short 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.