Correlation Between ProShares UltraShort and VIIX

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

Diversification Opportunities for ProShares UltraShort and VIIX

-0.94

Correlation Coefficient

ProShares UltraShort  VIIX

Pay attention - limited upside

The 3 months correlation between ProShares and VIIX is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Euro and VIIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIIX 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 VIIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIIX has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and VIIX go up and down completely randomly.

Pair Corralation between ProShares UltraShort and VIIX

If you would invest  3,387  in ProShares UltraShort Euro on September 24, 2024 and sell it today you would earn a total of  58.00  from holding ProShares UltraShort Euro or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

ProShares UltraShort Euro  vs.  VIIX

ProShares UltraShort Euro

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Euro are ranked lower than 20 (%) 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.

VIIX

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ProShares UltraShort and VIIX

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

The idea behind ProShares UltraShort Euro and VIIX 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.