Correlation Between ProShares UltraShort and Global X

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

Diversification Opportunities for ProShares UltraShort and Global X

-0.62

Correlation Coefficient

ProShares UltraShort  Global X

Excellent diversification

The 3 months correlation between ProShares and Global is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and Global X Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Data 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Data has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Global X go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Global X

Considering the 90-day investment horizon ProShares UltraShort is expected to generate 4.44 times less return on investment than Global X. But when comparing it to its historical volatility, ProShares UltraShort Yen is 1.24 times less risky than Global X. It trades about 0.03 of its potential returns per unit of risk. Global X Data is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,647  in Global X Data on October 25, 2024 and sell it today you would earn a total of  57.00  from holding Global X Data or generate 3.46% return on investment over 90 days.

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

ProShares UltraShort Yen  vs.  Global X Data

ProShares UltraShort Yen

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Yen are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Global X Data

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Data has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Global X 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 Global X

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

The idea behind ProShares UltraShort Yen and Global X Data 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.