Correlation Between ProShares Ultra and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Invesco DWA 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 DWA 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 DWA Technology, you can compare the effects of market volatilities on ProShares Ultra and Invesco DWA 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 DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Invesco DWA.
Diversification Opportunities for ProShares Ultra and Invesco DWA
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 DWA Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Technology 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 DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Technology has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Invesco DWA go up and down completely randomly.
Pair Corralation between ProShares Ultra and Invesco DWA
Considering the 90-day investment horizon ProShares Ultra is expected to generate 2.15 times less return on investment than Invesco DWA. In addition to that, ProShares Ultra is 1.39 times more volatile than Invesco DWA Technology. It trades about 0.03 of its total potential returns per unit of risk. Invesco DWA Technology is currently generating about 0.08 per unit of volatility. If you would invest 4,143 in Invesco DWA Technology on August 27, 2024 and sell it today you would earn a total of 3,443 from holding Invesco DWA Technology or generate 83.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Oil vs. Invesco DWA Technology
Performance |
| Timeline |
| ProShares Ultra Oil |
| Invesco DWA Technology |
ProShares Ultra and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and Invesco DWA
The main advantage of trading using opposite ProShares Ultra and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.| ProShares Ultra vs. ProShares UltraShort Oil | ProShares Ultra vs. ProShares Ultra Basic | ProShares Ultra vs. ProShares Ultra Financials | ProShares Ultra vs. ProShares Ultra Real |
| Invesco DWA vs. Invesco DWA Healthcare | Invesco DWA vs. Invesco DWA Industrials | Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco Dynamic Semiconductors |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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