Correlation Between PROSHARES ULTRASHORT and Northern Lights

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

By analyzing existing cross correlation between PROSHARES ULTRASHORT RUSSELL and Northern Lights, you can compare the effects of market volatilities on PROSHARES ULTRASHORT and Northern Lights 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 ULTRASHORT with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROSHARES ULTRASHORT and Northern Lights.

Diversification Opportunities for PROSHARES ULTRASHORT and Northern Lights

-0.27

Correlation Coefficient

PROSHARES ULTRASHORT  Northern Lights

Very good diversification

The 3 months correlation between PROSHARES and Northern is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding PROSHARES ULTRASHORT RUSSELL and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and PROSHARES ULTRASHORT 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 ULTRASHORT RUSSELL are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of PROSHARES ULTRASHORT i.e., PROSHARES ULTRASHORT and Northern Lights go up and down completely randomly.

Pair Corralation between PROSHARES ULTRASHORT and Northern Lights

Considering the 90-day investment horizon PROSHARES ULTRASHORT RUSSELL is expected to under-perform the Northern Lights. In addition to that, PROSHARES ULTRASHORT is 25.66 times more volatile than Northern Lights. It trades about -0.01 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.01 per unit of volatility. If you would invest  3,483  in Northern Lights on September 30, 2024 and sell it today you would earn a total of  15.00  from holding Northern Lights or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

PROSHARES ULTRASHORT RUSSELL  vs.  Northern Lights

PROSHARES ULTRASHORT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROSHARES ULTRASHORT RUSSELL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Etf's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Northern Lights

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Lights has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Northern Lights is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PROSHARES ULTRASHORT and Northern Lights

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

The idea behind PROSHARES ULTRASHORT RUSSELL and Northern Lights 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.