Correlation Between ProShares Short and ProShares Short

Can any of the company-specific risk be diversified away by investing in both ProShares Short 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 Short 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 Short QQQ and ProShares Short Russell2000, you can compare the effects of market volatilities on ProShares Short 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 Short with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and ProShares Short.

Diversification Opportunities for ProShares Short and ProShares Short

0.27

Correlation Coefficient

ProShares Short  ProShares Short

Modest diversification

The 3 months correlation between ProShares and ProShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short QQQ and ProShares Short Russell2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short Russ and ProShares Short 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 Short QQQ 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 Russ has no effect on the direction of ProShares Short i.e., ProShares Short and ProShares Short go up and down completely randomly.

Pair Corralation between ProShares Short and ProShares Short

Considering the 90-day investment horizon ProShares Short QQQ is expected to under-perform the ProShares Short. In addition to that, ProShares Short is 1.05 times more volatile than ProShares Short Russell2000. It trades about -0.01 of its total potential returns per unit of risk. ProShares Short Russell2000 is currently generating about 0.19 per unit of volatility. If you would invest  1,711  in ProShares Short Russell2000 on November 28, 2024 and sell it today you would earn a total of  219.00  from holding ProShares Short Russell2000 or generate 12.8% return on investment over 90 days.

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

ProShares Short QQQ  vs.  ProShares Short Russell2000

ProShares Short QQQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short QQQ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, ProShares Short is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ProShares Short Russ

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short Russell2000 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ProShares Short displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Short and ProShares Short

The main advantage of trading using opposite ProShares Short and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short 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 Short QQQ and ProShares Short Russell2000 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.