Correlation Between ProShares UltraShort and Matthews China

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

Diversification Opportunities for ProShares UltraShort and Matthews China

-0.87

Correlation Coefficient

ProShares UltraShort  Matthews China

Pay attention - limited upside

The 3 months correlation between ProShares and Matthews is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and Matthews China Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Active 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 Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Active has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Matthews China go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Matthews China

Considering the 90-day investment horizon ProShares UltraShort Yen is expected to under-perform the Matthews China. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort Yen is 1.12 times less risky than Matthews China. The etf trades about -0.09 of its potential returns per unit of risk. The Matthews China Active is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,234  in Matthews China Active on December 21, 2024 and sell it today you would earn a total of  290.00  from holding Matthews China Active or generate 12.98% 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.  Matthews China Active

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.

Matthews China Active

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Active are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Matthews China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraShort and Matthews China

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

The idea behind ProShares UltraShort Yen and Matthews China Active 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.