Correlation Between ProShares Short and ProShares Ultra

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

By analyzing existing cross correlation between ProShares Short VIX and ProShares Ultra VIX, you can compare the effects of market volatilities on ProShares Short and ProShares Ultra 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 Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and ProShares Ultra.

Diversification Opportunities for ProShares Short and ProShares Ultra

-0.78

Correlation Coefficient

ProShares Short  ProShares Ultra

Pay attention - limited upside

The 3 months correlation between ProShares and ProShares is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short VIX and ProShares Ultra VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra VIX 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 VIX are associated (or correlated) with ProShares Ultra. 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 VIX has no effect on the direction of ProShares Short i.e., ProShares Short and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares Short and ProShares Ultra

Given the investment horizon of 90 days ProShares Short VIX is expected to generate 0.34 times more return on investment than ProShares Ultra. However, ProShares Short VIX is 2.91 times less risky than ProShares Ultra. It trades about 0.06 of its potential returns per unit of risk. ProShares Ultra VIX is currently generating about -0.05 per unit of risk. If you would invest  2,910  in ProShares Short VIX on December 4, 2024 and sell it today you would earn a total of  1,787  from holding ProShares Short VIX or generate 61.41% return on investment over 90 days.

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

ProShares Short VIX  vs.  ProShares Ultra VIX

ProShares Short VIX

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short VIX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

ProShares Ultra VIX

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra VIX are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ProShares Ultra showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Short and ProShares Ultra

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

The idea behind ProShares Short VIX and ProShares Ultra VIX 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.