Correlation Between ProShares UltraShort and Franklin FTSE

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

Diversification Opportunities for ProShares UltraShort and Franklin FTSE

-0.91

Correlation Coefficient

ProShares UltraShort  Franklin FTSE

Pay attention - limited upside

The 3 months correlation between ProShares and Franklin is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and Franklin FTSE China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE China 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE China has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Franklin FTSE go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Franklin FTSE

Considering the 90-day investment horizon ProShares UltraShort Yen is expected to under-perform the Franklin FTSE. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort Yen is 1.11 times less risky than Franklin FTSE. The etf trades about -0.09 of its potential returns per unit of risk. The Franklin FTSE China is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,865  in Franklin FTSE China on December 21, 2024 and sell it today you would earn a total of  350.60  from holding Franklin FTSE China or generate 18.8% return on investment over 90 days.

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

ProShares UltraShort Yen  vs.  Franklin FTSE China

ProShares UltraShort Yen

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraShort Yen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Franklin FTSE China

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE China are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Franklin FTSE demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraShort and Franklin FTSE

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

The idea behind ProShares UltraShort Yen and Franklin FTSE China 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.