Correlation Between ProShares UltraShort and Franklin FTSE

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

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

Diversification Opportunities for ProShares UltraShort and Franklin FTSE

-0.55

Correlation Coefficient

ProShares UltraShort  Franklin FTSE

Excellent diversification

The 3 months correlation between ProShares and Franklin is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and Franklin FTSE China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE China 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 20 are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE China has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Franklin FTSE go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Franklin FTSE

Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 1.14 times more return on investment than Franklin FTSE. However, ProShares UltraShort is 1.14 times more volatile than Franklin FTSE China. It trades about 0.05 of its potential returns per unit of risk. Franklin FTSE China is currently generating about 0.0 per unit of risk. If you would invest  2,496  in ProShares UltraShort 20 on October 10, 2024 and sell it today you would earn a total of  1,303  from holding ProShares UltraShort 20 or generate 52.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

ProShares UltraShort 20  vs.  Franklin FTSE China

ProShares UltraShort

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

Franklin FTSE China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with ProShares UltraShort and Franklin FTSE

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

The idea behind ProShares UltraShort 20 and Franklin FTSE China 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.