Correlation Between ProShares UltraPro and ProShares Short

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

Diversification Opportunities for ProShares UltraPro and ProShares Short

0.12

Correlation Coefficient

ProShares UltraPro  ProShares Short

Average diversification

The 3 months correlation between ProShares and ProShares is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Short and ProShares Short Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short Real and ProShares UltraPro 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 UltraPro Short 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 Real has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and ProShares Short go up and down completely randomly.

Pair Corralation between ProShares UltraPro and ProShares Short

Given the investment horizon of 90 days ProShares UltraPro Short is expected to generate 2.73 times more return on investment than ProShares Short. However, ProShares UltraPro is 2.73 times more volatile than ProShares Short Real. It trades about 0.1 of its potential returns per unit of risk. ProShares Short Real is currently generating about -0.03 per unit of risk. If you would invest  2,204  in ProShares UltraPro Short on December 29, 2024 and sell it today you would earn a total of  396.00  from holding ProShares UltraPro Short or generate 17.97% return on investment over 90 days.

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

ProShares UltraPro Short  vs.  ProShares Short Real

ProShares UltraPro Short

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Short are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, ProShares UltraPro unveiled solid returns over the last few months and may actually be approaching a breakup point.

ProShares Short Real

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ProShares UltraPro and ProShares Short

The main advantage of trading using opposite ProShares UltraPro and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro 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 UltraPro Short and ProShares Short Real 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.