Correlation Between IShares Core and ProShares Ultra

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

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

Diversification Opportunities for IShares Core and ProShares Ultra

-0.24

Correlation Coefficient

IShares Core  ProShares Ultra

Very good diversification

The 3 months correlation between IShares and ProShares is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and ProShares Ultra MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra MSCI and IShares Core 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 Core SP are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra MSCI has no effect on the direction of IShares Core i.e., IShares Core and ProShares Ultra go up and down completely randomly.

Pair Corralation between IShares Core and ProShares Ultra

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.73 times more return on investment than ProShares Ultra. However, iShares Core SP is 1.37 times less risky than ProShares Ultra. It trades about -0.11 of its potential returns per unit of risk. ProShares Ultra MSCI is currently generating about -0.35 per unit of risk. If you would invest  60,760  in iShares Core SP on October 6, 2024 and sell it today you would lose (1,299) from holding iShares Core SP or give up 2.14% of portfolio value over 90 days.

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

iShares Core SP  vs.  ProShares Ultra MSCI

iShares Core SP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares Ultra MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with IShares Core and ProShares Ultra

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

The idea behind iShares Core SP and ProShares Ultra MSCI 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.