Correlation Between IShares 0 and UST Inc

Can any of the company-specific risk be diversified away by investing in both IShares 0 and UST Inc 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 0 and UST Inc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 0 3 Month and ProShares Ultra 7 10, you can compare the effects of market volatilities on IShares 0 and UST Inc 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 0 with a short position of UST Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and UST Inc.

Diversification Opportunities for IShares 0 and UST Inc

-0.34

Correlation Coefficient

IShares 0  UST Inc

Very good diversification

The 3 months correlation between IShares and UST is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares 0 3 Month and ProShares Ultra 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra 7 and IShares 0 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 0 3 Month are associated (or correlated) with UST Inc. 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 7 has no effect on the direction of IShares 0 i.e., IShares 0 and UST Inc go up and down completely randomly.

Pair Corralation between IShares 0 and UST Inc

Given the investment horizon of 90 days IShares 0 is expected to generate 10.39 times less return on investment than UST Inc. But when comparing it to its historical volatility, iShares 0 3 Month is 72.96 times less risky than UST Inc. It trades about 1.35 of its potential returns per unit of risk. ProShares Ultra 7 10 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,110  in ProShares Ultra 7 10 on November 28, 2024 and sell it today you would earn a total of  148.00  from holding ProShares Ultra 7 10 or generate 3.6% return on investment over 90 days.

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

iShares 0 3 Month  vs.  ProShares Ultra 7 10

iShares 0 3

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 0 3 Month are ranked lower than 96 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares 0 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares Ultra 7

Risk-Adjusted Performance

Weak

Over the last 90 days ProShares Ultra 7 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, UST Inc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares 0 and UST Inc

The main advantage of trading using opposite IShares 0 and UST Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 position performs unexpectedly, UST Inc 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 UST Inc will offset losses from the drop in UST Inc's long position.

The idea behind iShares 0 3 Month and ProShares Ultra 7 10 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.