Correlation Between ProShares UltraShort and ProShares UltraShort

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

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

Diversification Opportunities for ProShares UltraShort and ProShares UltraShort

0.41

Correlation Coefficient

ProShares UltraShort  ProShares UltraShort

Very weak diversification

The 3 months correlation between ProShares and ProShares is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Basic and ProShares UltraShort QQQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort QQQ 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 Basic 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 QQQ has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ProShares UltraShort

Considering the 90-day investment horizon ProShares UltraShort Basic is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort Basic is 1.43 times less risky than ProShares UltraShort. The etf trades about -0.03 of its potential returns per unit of risk. The ProShares UltraShort QQQ is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,127  in ProShares UltraShort QQQ on December 27, 2024 and sell it today you would earn a total of  483.00  from holding ProShares UltraShort QQQ or generate 15.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

ProShares UltraShort Basic  vs.  ProShares UltraShort QQQ

ProShares UltraShort

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraShort Basic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, ProShares UltraShort is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

ProShares UltraShort QQQ

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort QQQ are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, ProShares UltraShort exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraShort and ProShares UltraShort

The main advantage of trading using opposite ProShares UltraShort and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 ProShares UltraShort Basic and ProShares UltraShort QQQ 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.