Correlation Between ProShares UltraShort and KraneShares SSE

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

Diversification Opportunities for ProShares UltraShort and KraneShares SSE

-0.34

Correlation Coefficient

ProShares UltraShort  KraneShares SSE

Very good diversification

The 3 months correlation between ProShares and KraneShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and KraneShares SSE STAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares SSE STAR 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 KraneShares SSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares SSE STAR has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and KraneShares SSE go up and down completely randomly.

Pair Corralation between ProShares UltraShort and KraneShares SSE

Considering the 90-day investment horizon ProShares UltraShort Yen is expected to generate 0.71 times more return on investment than KraneShares SSE. However, ProShares UltraShort Yen is 1.4 times less risky than KraneShares SSE. It trades about 0.03 of its potential returns per unit of risk. KraneShares SSE STAR is currently generating about -0.1 per unit of risk. If you would invest  4,743  in ProShares UltraShort Yen on October 25, 2024 and sell it today you would earn a total of  32.00  from holding ProShares UltraShort Yen or generate 0.67% return on investment over 90 days.

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

ProShares UltraShort Yen  vs.  KraneShares SSE STAR

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.

KraneShares SSE STAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares SSE STAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, KraneShares SSE 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 KraneShares SSE

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

The idea behind ProShares UltraShort Yen and KraneShares SSE STAR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.