Correlation Between MicroSectors FANG and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and ProShares Ultra 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 MicroSectors FANG and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and ProShares Ultra MSCI, you can compare the effects of market volatilities on MicroSectors FANG and ProShares Ultra 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 MicroSectors FANG with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and ProShares Ultra.
Diversification Opportunities for MicroSectors FANG and ProShares Ultra
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MicroSectors and ProShares is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ProShares Ultra MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra MSCI and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra MSCI has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ProShares Ultra go up and down completely randomly.
Pair Corralation between MicroSectors FANG and ProShares Ultra
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 1.85 times more return on investment than ProShares Ultra. However, MicroSectors FANG is 1.85 times more volatile than ProShares Ultra MSCI. It trades about 0.1 of its potential returns per unit of risk. ProShares Ultra MSCI is currently generating about -0.08 per unit of risk. If you would invest 23,289 in MicroSectors FANG Index on August 25, 2024 and sell it today you would earn a total of 27,611 from holding MicroSectors FANG Index or generate 118.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. ProShares Ultra MSCI
Performance |
| Timeline |
| MicroSectors FANG Index |
| ProShares Ultra MSCI |
MicroSectors FANG and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and ProShares Ultra
The main advantage of trading using opposite MicroSectors FANG and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, ProShares Ultra 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 ProShares Ultra will offset losses from the drop in ProShares Ultra's long position.| MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. MicroSectors Solactive FANG | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Technology |
| ProShares Ultra vs. Direxion Daily SP | ProShares Ultra vs. Direxion Daily Semiconductor | ProShares Ultra vs. Direxion Daily Semiconductor |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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