Correlation Between ProShares VIX and ProShares UltraShort

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

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

Diversification Opportunities for ProShares VIX and ProShares UltraShort

0.28

Correlation Coefficient

ProShares VIX  ProShares UltraShort

Modest diversification

The 3 months correlation between ProShares and ProShares is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Short Term and ProShares UltraShort Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Euro and ProShares VIX 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 VIX Short Term 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 Euro has no effect on the direction of ProShares VIX i.e., ProShares VIX and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ProShares VIX and ProShares UltraShort

Given the investment horizon of 90 days ProShares VIX Short Term is expected to under-perform the ProShares UltraShort. In addition to that, ProShares VIX is 5.17 times more volatile than ProShares UltraShort Euro. It trades about -0.04 of its total potential returns per unit of risk. ProShares UltraShort Euro is currently generating about 0.06 per unit of volatility. If you would invest  2,832  in ProShares UltraShort Euro on December 4, 2024 and sell it today you would earn a total of  663.00  from holding ProShares UltraShort Euro or generate 23.41% return on investment over 90 days.

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

ProShares VIX Short Term  vs.  ProShares UltraShort Euro

ProShares VIX Short

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares VIX Short Term are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ProShares VIX showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares UltraShort Euro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Euro are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares UltraShort is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ProShares VIX and ProShares UltraShort

The main advantage of trading using opposite ProShares VIX and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares VIX 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 ProShares VIX Short Term and ProShares UltraShort Euro 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.