Correlation Between ProShares UltraShort and Invesco CurrencyShares

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Invesco CurrencyShares 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 Invesco CurrencyShares 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 Invesco CurrencyShares Japanese, you can compare the effects of market volatilities on ProShares UltraShort and Invesco CurrencyShares 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 Invesco CurrencyShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Invesco CurrencyShares.

Diversification Opportunities for ProShares UltraShort and Invesco CurrencyShares

-0.98

Correlation Coefficient

ProShares UltraShort  Invesco CurrencyShares

Pay attention - limited upside

The 3 months correlation between ProShares and Invesco is -0.98. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and Invesco CurrencyShares Japanes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CurrencyShares 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 Invesco CurrencyShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CurrencyShares has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Invesco CurrencyShares go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Invesco CurrencyShares

Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 2.31 times more return on investment than Invesco CurrencyShares. However, ProShares UltraShort is 2.31 times more volatile than Invesco CurrencyShares Japanese. It trades about 0.08 of its potential returns per unit of risk. Invesco CurrencyShares Japanese is currently generating about -0.06 per unit of risk. If you would invest  2,977  in ProShares UltraShort 20 on September 3, 2024 and sell it today you would earn a total of  237.00  from holding ProShares UltraShort 20 or generate 7.96% return on investment over 90 days.

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

ProShares UltraShort 20  vs.  Invesco CurrencyShares Japanes

ProShares UltraShort

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco CurrencyShares Japanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraShort and Invesco CurrencyShares

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

The idea behind ProShares UltraShort 20 and Invesco CurrencyShares Japanese 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.