Correlation Between MicroSectors FANG and ProShares UltraPro
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and ProShares UltraPro 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 UltraPro 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 UltraPro SP500, you can compare the effects of market volatilities on MicroSectors FANG and ProShares UltraPro 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 UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and ProShares UltraPro.
Diversification Opportunities for MicroSectors FANG and ProShares UltraPro
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MicroSectors and ProShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ProShares UltraPro SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro SP500 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 UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro SP500 has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ProShares UltraPro go up and down completely randomly.
Pair Corralation between MicroSectors FANG and ProShares UltraPro
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 1.71 times more return on investment than ProShares UltraPro. However, MicroSectors FANG is 1.71 times more volatile than ProShares UltraPro SP500. It trades about 0.11 of its potential returns per unit of risk. ProShares UltraPro SP500 is currently generating about 0.08 per unit of risk. If you would invest 46,426 in MicroSectors FANG Index on August 23, 2024 and sell it today you would earn a total of 4,216 from holding MicroSectors FANG Index or generate 9.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. ProShares UltraPro SP500
Performance |
| Timeline |
| MicroSectors FANG Index |
| ProShares UltraPro SP500 |
MicroSectors FANG and ProShares UltraPro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and ProShares UltraPro
The main advantage of trading using opposite MicroSectors FANG and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, ProShares UltraPro 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 UltraPro will offset losses from the drop in ProShares UltraPro'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 UltraPro vs. ProShares Ultra SP500 | ProShares UltraPro vs. ProShares Ultra QQQ | ProShares UltraPro vs. Direxion Daily Technology | ProShares UltraPro vs. Direxion Daily 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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