Correlation Between Sprott Uranium and ProShares UltraShort

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

By analyzing existing cross correlation between Sprott Uranium Miners and ProShares UltraShort Utilities, you can compare the effects of market volatilities on Sprott Uranium and ProShares UltraShort 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 Sprott Uranium with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Uranium and ProShares UltraShort.

Diversification Opportunities for Sprott Uranium and ProShares UltraShort

-0.87

Correlation Coefficient

Sprott Uranium  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between Sprott and ProShares is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Uranium Miners and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Sprott Uranium 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 Sprott Uranium Miners are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Sprott Uranium i.e., Sprott Uranium and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Sprott Uranium and ProShares UltraShort

Given the investment horizon of 90 days Sprott Uranium Miners is expected to under-perform the ProShares UltraShort. In addition to that, Sprott Uranium is 1.07 times more volatile than ProShares UltraShort Utilities. It trades about -0.03 of its total potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about 0.06 per unit of volatility. If you would invest  1,524  in ProShares UltraShort Utilities on October 7, 2024 and sell it today you would earn a total of  90.00  from holding ProShares UltraShort Utilities or generate 5.91% return on investment over 90 days.

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

Sprott Uranium Miners  vs.  ProShares UltraShort Utilities

Sprott Uranium Miners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Uranium Miners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sprott Uranium is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ProShares UltraShort

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Utilities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sprott Uranium and ProShares UltraShort

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

The idea behind Sprott Uranium Miners and ProShares UltraShort Utilities 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.