Correlation Between ProShares UltraShort and Invesco China

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

By analyzing existing cross correlation between ProShares UltraShort Yen and Invesco China Technology, you can compare the effects of market volatilities on ProShares UltraShort and Invesco China 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 China. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Invesco China.

Diversification Opportunities for ProShares UltraShort and Invesco China

-0.58

Correlation Coefficient

ProShares UltraShort  Invesco China

Excellent diversification

The 3 months correlation between ProShares and Invesco is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and Invesco China Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco China Technology 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 Yen are associated (or correlated) with Invesco China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco China Technology has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Invesco China go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Invesco China

Considering the 90-day investment horizon ProShares UltraShort is expected to generate 1.93 times less return on investment than Invesco China. But when comparing it to its historical volatility, ProShares UltraShort Yen is 1.69 times less risky than Invesco China. It trades about 0.05 of its potential returns per unit of risk. Invesco China Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,104  in Invesco China Technology on October 9, 2024 and sell it today you would earn a total of  671.00  from holding Invesco China Technology or generate 21.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.46%
Values	Daily Returns

ProShares UltraShort Yen  vs.  Invesco China Technology

ProShares UltraShort Yen

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Yen are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco China Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco China Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with ProShares UltraShort and Invesco China

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

The idea behind ProShares UltraShort Yen and Invesco China Technology 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 Anywhere module to track or share privately all of your investments from the convenience of any device.