Correlation Between IShares Telecommunicatio and ProShares Ultra

Can any of the company-specific risk be diversified away by investing in both IShares Telecommunicatio 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 Telecommunicatio 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 Telecommunications ETF and ProShares Ultra Bloomberg, you can compare the effects of market volatilities on IShares Telecommunicatio 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 Telecommunicatio with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Telecommunicatio and ProShares Ultra.

Diversification Opportunities for IShares Telecommunicatio and ProShares Ultra

-0.3

Correlation Coefficient

IShares Telecommunicatio  ProShares Ultra

Very good diversification

The 3 months correlation between IShares and ProShares is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares Telecommunications ETF and ProShares Ultra Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Bloomberg and IShares Telecommunicatio 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 Telecommunications ETF 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 Bloomberg has no effect on the direction of IShares Telecommunicatio i.e., IShares Telecommunicatio and ProShares Ultra go up and down completely randomly.

Pair Corralation between IShares Telecommunicatio and ProShares Ultra

Considering the 90-day investment horizon iShares Telecommunications ETF is expected to under-perform the ProShares Ultra. But the etf apears to be less risky and, when comparing its historical volatility, iShares Telecommunications ETF is 5.69 times less risky than ProShares Ultra. The etf trades about -0.17 of its potential returns per unit of risk. The ProShares Ultra Bloomberg is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  3,811  in ProShares Ultra Bloomberg on October 4, 2024 and sell it today you would earn a total of  1,771  from holding ProShares Ultra Bloomberg or generate 46.47% return on investment over 90 days.

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

iShares Telecommunications ETF  vs.  ProShares Ultra Bloomberg

IShares Telecommunicatio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Telecommunications ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Telecommunicatio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ProShares Ultra Bloomberg

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Bloomberg are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward indicators, ProShares Ultra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Telecommunicatio and ProShares Ultra

The main advantage of trading using opposite IShares Telecommunicatio and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Telecommunicatio 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 Telecommunications ETF and ProShares Ultra Bloomberg 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.