Correlation Between ProShares Ultra and WisdomTree Trust
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and WisdomTree Trust 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 WisdomTree Trust 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 WisdomTree Trust , you can compare the effects of market volatilities on ProShares Ultra and WisdomTree Trust 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 WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and WisdomTree Trust.
Diversification Opportunities for ProShares Ultra and WisdomTree Trust
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and WisdomTree is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Oil and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust 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 WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and WisdomTree Trust go up and down completely randomly.
Pair Corralation between ProShares Ultra and WisdomTree Trust
Considering the 90-day investment horizon ProShares Ultra is expected to generate 1.87 times less return on investment than WisdomTree Trust. In addition to that, ProShares Ultra is 1.61 times more volatile than WisdomTree Trust . It trades about 0.02 of its total potential returns per unit of risk. WisdomTree Trust is currently generating about 0.06 per unit of volatility. If you would invest 1,465 in WisdomTree Trust on August 31, 2024 and sell it today you would earn a total of 727.00 from holding WisdomTree Trust or generate 49.62% 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. WisdomTree Trust
Performance |
| Timeline |
| ProShares Ultra Oil |
| WisdomTree Trust |
ProShares Ultra and WisdomTree Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and WisdomTree Trust
The main advantage of trading using opposite ProShares Ultra and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, WisdomTree Trust 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 WisdomTree Trust will offset losses from the drop in WisdomTree Trust's long position.The idea behind ProShares Ultra Oil and WisdomTree Trust 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.| WisdomTree Trust vs. First Trust Nasdaq | WisdomTree Trust vs. Robo Global Artificial | WisdomTree Trust vs. Tidal Trust II | WisdomTree Trust vs. Global X Artificial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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