Correlation Between ProShares Short and ProShares UltraPro

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

By analyzing existing cross correlation between ProShares Short 20 and ProShares UltraPro Short, you can compare the effects of market volatilities on ProShares Short and ProShares UltraPro 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 UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and ProShares UltraPro.

Diversification Opportunities for ProShares Short and ProShares UltraPro

1.0

Correlation Coefficient

ProShares Short  ProShares UltraPro

No risk reduction

The 3 months correlation between ProShares and ProShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short 20 and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short 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 20 are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Short has no effect on the direction of ProShares Short i.e., ProShares Short and ProShares UltraPro go up and down completely randomly.

Pair Corralation between ProShares Short and ProShares UltraPro

Considering the 90-day investment horizon ProShares Short 20 is expected to generate 0.35 times more return on investment than ProShares UltraPro. However, ProShares Short 20 is 2.87 times less risky than ProShares UltraPro. It trades about -0.02 of its potential returns per unit of risk. ProShares UltraPro Short is currently generating about -0.03 per unit of risk. If you would invest  2,410  in ProShares Short 20 on September 19, 2024 and sell it today you would lose (9.00) from holding ProShares Short 20 or give up 0.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

ProShares Short 20  vs.  ProShares UltraPro Short

ProShares Short 20

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short 20 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, ProShares Short may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares UltraPro Short

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Short are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ProShares UltraPro unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Short and ProShares UltraPro

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

The idea behind ProShares Short 20 and ProShares UltraPro Short 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.