Correlation Between Ishares Trust and ProShares UltraPro

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

By analyzing existing cross correlation between Ishares Trust and ProShares UltraPro Dow30, you can compare the effects of market volatilities on Ishares Trust and ProShares UltraPro 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 Ishares Trust with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Trust and ProShares UltraPro.

Diversification Opportunities for Ishares Trust and ProShares UltraPro

0.63

Correlation Coefficient

Ishares Trust  ProShares UltraPro

Poor diversification

The 3 months correlation between Ishares and ProShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Trust and ProShares UltraPro Dow30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Dow30 and Ishares Trust 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 Ishares Trust are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Dow30 has no effect on the direction of Ishares Trust i.e., Ishares Trust and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Ishares Trust and ProShares UltraPro

Given the investment horizon of 90 days Ishares Trust is expected to generate 0.68 times more return on investment than ProShares UltraPro. However, Ishares Trust is 1.46 times less risky than ProShares UltraPro. It trades about 0.09 of its potential returns per unit of risk. ProShares UltraPro Dow30 is currently generating about -0.31 per unit of risk. If you would invest  3,259  in Ishares Trust on September 24, 2024 and sell it today you would earn a total of  80.87  from holding Ishares Trust or generate 2.48% return on investment over 90 days.

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

Ishares Trust   vs.  ProShares UltraPro Dow30

Ishares Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Ishares Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares UltraPro Dow30

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Dow30 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ProShares UltraPro is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ishares Trust and ProShares UltraPro

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

The idea behind Ishares Trust and ProShares UltraPro Dow30 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.