Correlation Between ProShares UltraShort and Fidelity MSCI

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

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

Diversification Opportunities for ProShares UltraShort and Fidelity MSCI

-0.95

Correlation Coefficient

ProShares UltraShort  Fidelity MSCI

Pay attention - limited upside

The 3 months correlation between ProShares and Fidelity is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Consumer and Fidelity MSCI Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Consumer 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 Consumer are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Consumer has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Fidelity MSCI go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Fidelity MSCI

Considering the 90-day investment horizon ProShares UltraShort Consumer is expected to under-perform the Fidelity MSCI. In addition to that, ProShares UltraShort is 2.05 times more volatile than Fidelity MSCI Consumer. It trades about -0.2 of its total potential returns per unit of risk. Fidelity MSCI Consumer is currently generating about 0.19 per unit of volatility. If you would invest  4,831  in Fidelity MSCI Consumer on December 11, 2024 and sell it today you would earn a total of  326.00  from holding Fidelity MSCI Consumer or generate 6.75% return on investment over 90 days.

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

ProShares UltraShort Consumer  vs.  Fidelity MSCI Consumer

ProShares UltraShort

Risk-Adjusted Performance

Very Weak

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

Fidelity MSCI Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity MSCI Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fidelity MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraShort and Fidelity MSCI

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

The idea behind ProShares UltraShort Consumer and Fidelity MSCI Consumer 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.