Correlation Between ProShares UltraShort and IShares Real

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

Diversification Opportunities for ProShares UltraShort and IShares Real

-0.78

Correlation Coefficient

ProShares UltraShort  IShares Real

Pay attention - limited upside

The 3 months correlation between ProShares and IShares is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and iShares Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Real Estate 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 IShares Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Real Estate has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IShares Real go up and down completely randomly.

Pair Corralation between ProShares UltraShort and IShares Real

Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 1.0 times more return on investment than IShares Real. However, ProShares UltraShort is 1.0 times more volatile than iShares Real Estate. It trades about 0.62 of its potential returns per unit of risk. iShares Real Estate is currently generating about -0.29 per unit of risk. If you would invest  3,208  in ProShares UltraShort 20 on October 9, 2024 and sell it today you would earn a total of  506.00  from holding ProShares UltraShort 20 or generate 15.77% return on investment over 90 days.

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

ProShares UltraShort 20  vs.  iShares Real Estate

ProShares UltraShort

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 12 (%) 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.

iShares Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IShares Real is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares UltraShort and IShares Real

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

The idea behind ProShares UltraShort 20 and iShares Real Estate 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.