Correlation Between MegaShort and MegaShort

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

By analyzing existing cross correlation between MegaShort SP 500 and MegaShort 20 Year, you can compare the effects of market volatilities on MegaShort and MegaShort 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 MegaShort with a short position of MegaShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of MegaShort and MegaShort.

Diversification Opportunities for MegaShort and MegaShort

0.53

Correlation Coefficient

MegaShort  MegaShort

Very weak diversification

The 3 months correlation between MegaShort and MegaShort is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MegaShort SP 500 and MegaShort 20 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaShort 20 Year and MegaShort 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 MegaShort SP 500 are associated (or correlated) with MegaShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaShort 20 Year has no effect on the direction of MegaShort i.e., MegaShort and MegaShort go up and down completely randomly.

Pair Corralation between MegaShort and MegaShort

Assuming the 90 days trading horizon MegaShort SP 500 is expected to under-perform the MegaShort. But the etf apears to be less risky and, when comparing its historical volatility, MegaShort SP 500 is 1.12 times less risky than MegaShort. The etf trades about -0.28 of its potential returns per unit of risk. The MegaShort 20 Year is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,015  in MegaShort 20 Year on April 21, 2025 and sell it today you would earn a total of  40.00  from holding MegaShort 20 Year or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.24%
Values	Daily Returns

MegaShort SP 500  vs.  MegaShort 20 Year

MegaShort SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days MegaShort SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

MegaShort 20 Year

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MegaShort 20 Year are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MegaShort is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MegaShort and MegaShort

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

The idea behind MegaShort SP 500 and MegaShort 20 Year 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.