Correlation Between IShares Consumer and ProShares UltraShort

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

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

Diversification Opportunities for IShares Consumer and ProShares UltraShort

-0.87

Correlation Coefficient

IShares Consumer  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between IShares and ProShares is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Staples and ProShares UltraShort Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and IShares Consumer 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 Consumer Staples are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of IShares Consumer i.e., IShares Consumer and ProShares UltraShort go up and down completely randomly.

Pair Corralation between IShares Consumer and ProShares UltraShort

Considering the 90-day investment horizon iShares Consumer Staples is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, iShares Consumer Staples is 1.74 times less risky than ProShares UltraShort. The etf trades about -0.53 of its potential returns per unit of risk. The ProShares UltraShort Consumer is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,192  in ProShares UltraShort Consumer on September 24, 2024 and sell it today you would earn a total of  60.00  from holding ProShares UltraShort Consumer or generate 5.03% return on investment over 90 days.

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

iShares Consumer Staples  vs.  ProShares UltraShort Consumer

iShares Consumer Staples

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Consumer Staples has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Consumer is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ProShares UltraShort

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Consumer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Consumer and ProShares UltraShort

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

The idea behind iShares Consumer Staples and ProShares UltraShort Consumer 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.