Correlation Between ProShares UltraShort and IndexIQ

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

Diversification Opportunities for ProShares UltraShort and IndexIQ

0.32

Correlation Coefficient

ProShares UltraShort  IndexIQ

Weak diversification

The 3 months correlation between ProShares and IndexIQ is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IndexIQ go up and down completely randomly.

Pair Corralation between ProShares UltraShort and IndexIQ

If you would invest  3,620  in ProShares UltraShort 20 on October 25, 2024 and sell it today you would earn a total of  51.00  from holding ProShares UltraShort 20 or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.56%
Values	Daily Returns

ProShares UltraShort 20  vs.  IndexIQ

ProShares UltraShort

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort 20 are ranked lower than 7 (%) 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 February 2025.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with ProShares UltraShort and IndexIQ

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

The idea behind ProShares UltraShort 20 and IndexIQ 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.