Correlation Between Invesco Dynamic and ProShares UltraShort

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

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

Diversification Opportunities for Invesco Dynamic and ProShares UltraShort

-0.55

Correlation Coefficient

Invesco Dynamic  ProShares UltraShort

Excellent diversification

The 3 months correlation between Invesco and ProShares is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Food and ProShares UltraShort Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Invesco Dynamic 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 Invesco Dynamic Food 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 Invesco Dynamic i.e., Invesco Dynamic and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Invesco Dynamic and ProShares UltraShort

Considering the 90-day investment horizon Invesco Dynamic Food is expected to generate 0.5 times more return on investment than ProShares UltraShort. However, Invesco Dynamic Food is 1.98 times less risky than ProShares UltraShort. It trades about -0.18 of its potential returns per unit of risk. ProShares UltraShort Consumer is currently generating about -0.17 per unit of risk. If you would invest  4,696  in Invesco Dynamic Food on December 10, 2024 and sell it today you would lose (165.00) from holding Invesco Dynamic Food or give up 3.51% of portfolio value over 90 days.

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

Invesco Dynamic Food  vs.  ProShares UltraShort Consumer

Invesco Dynamic Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Dynamic Food has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Etf's fundamental drivers remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the ETF firm stakeholders.

ProShares UltraShort

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Invesco Dynamic and ProShares UltraShort

The main advantage of trading using opposite Invesco Dynamic and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Dynamic 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 Invesco Dynamic Food 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.