Correlation Between IShares MSCI and ProShares Ultra

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

Diversification Opportunities for IShares MSCI and ProShares Ultra

0.53

Correlation Coefficient

IShares MSCI  ProShares Ultra

Very weak diversification

The 3 months correlation between IShares and ProShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China 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 MSCI 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 MSCI China 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 MSCI i.e., IShares MSCI and ProShares Ultra go up and down completely randomly.

Pair Corralation between IShares MSCI and ProShares Ultra

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.94 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, iShares MSCI China is 1.69 times less risky than ProShares Ultra. It trades about 0.15 of its potential returns per unit of risk. ProShares Ultra MSCI is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,381  in ProShares Ultra MSCI on December 27, 2024 and sell it today you would earn a total of  440.00  from holding ProShares Ultra MSCI or generate 31.86% return on investment over 90 days.

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

iShares MSCI China  vs.  ProShares Ultra MSCI

iShares MSCI China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ProShares Ultra MSCI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra MSCI are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, ProShares Ultra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and ProShares Ultra

The main advantage of trading using opposite IShares MSCI and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI China 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.