Correlation Between ProShares Ultra and Invesco RAFI
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Invesco RAFI 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 Ultra and Invesco RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Ultra Oil and Invesco RAFI Strategic, you can compare the effects of market volatilities on ProShares Ultra and Invesco RAFI 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 Ultra with a short position of Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Invesco RAFI.
Diversification Opportunities for ProShares Ultra and Invesco RAFI
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Invesco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Oil and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic and ProShares Ultra 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 Ultra Oil are associated (or correlated) with Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Invesco RAFI go up and down completely randomly.
Pair Corralation between ProShares Ultra and Invesco RAFI
Considering the 90-day investment horizon ProShares Ultra is expected to generate 1.53 times less return on investment than Invesco RAFI. In addition to that, ProShares Ultra is 3.56 times more volatile than Invesco RAFI Strategic. It trades about 0.02 of its total potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.11 per unit of volatility. If you would invest 3,603 in Invesco RAFI Strategic on August 31, 2024 and sell it today you would earn a total of 1,600 from holding Invesco RAFI Strategic or generate 44.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
ProShares Ultra Oil vs. Invesco RAFI Strategic
Performance |
| Timeline |
| ProShares Ultra Oil |
| Invesco RAFI Strategic |
ProShares Ultra and Invesco RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and Invesco RAFI
The main advantage of trading using opposite ProShares Ultra and Invesco RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Invesco RAFI 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 Invesco RAFI will offset losses from the drop in Invesco RAFI's long position.The idea behind ProShares Ultra Oil and Invesco RAFI Strategic 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.| Invesco RAFI vs. iShares Core SP | Invesco RAFI vs. iShares Core MSCI | Invesco RAFI vs. iShares Broad USD | Invesco RAFI vs. iShares Core SP |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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