Correlation Between ProShares Ultra and ProShares Short

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

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

Diversification Opportunities for ProShares Ultra and ProShares Short

0.72

Correlation Coefficient

ProShares Ultra  ProShares Short

Poor diversification

The 3 months correlation between ProShares and ProShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Telecommunicat and ProShares Short VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short VIX and ProShares Ultra 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 Ultra Telecommunications are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short VIX has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ProShares Short go up and down completely randomly.

Pair Corralation between ProShares Ultra and ProShares Short

Considering the 90-day investment horizon ProShares Ultra Telecommunications is expected to generate 1.52 times more return on investment than ProShares Short. However, ProShares Ultra is 1.52 times more volatile than ProShares Short VIX. It trades about 0.18 of its potential returns per unit of risk. ProShares Short VIX is currently generating about 0.05 per unit of risk. If you would invest  8,468  in ProShares Ultra Telecommunications on September 15, 2024 and sell it today you would earn a total of  628.00  from holding ProShares Ultra Telecommunications or generate 7.42% return on investment over 90 days.

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

ProShares Ultra Telecommunicat  vs.  ProShares Short VIX

ProShares Ultra Tele

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Telecommunications are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, ProShares Ultra disclosed solid returns over the last few months and may actually be approaching a breakup point.

ProShares Short VIX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short VIX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, ProShares Short may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares Ultra and ProShares Short

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

The idea behind ProShares Ultra Telecommunications and ProShares Short VIX 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.