Correlation Between ETRACS 2x and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both ETRACS 2x 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 ETRACS 2x and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2x Leveraged and ProShares Ultra SP500, you can compare the effects of market volatilities on ETRACS 2x 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 ETRACS 2x with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2x and ProShares Ultra.
Diversification Opportunities for ETRACS 2x and ProShares Ultra
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ETRACS and ProShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2x Leveraged and ProShares Ultra SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra SP500 and ETRACS 2x 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 ETRACS 2x Leveraged 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 SP500 has no effect on the direction of ETRACS 2x i.e., ETRACS 2x and ProShares Ultra go up and down completely randomly.
Pair Corralation between ETRACS 2x and ProShares Ultra
Given the investment horizon of 90 days ETRACS 2x is expected to generate 1.69 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, ETRACS 2x Leveraged is 1.08 times less risky than ProShares Ultra. It trades about 0.06 of its potential returns per unit of risk. ProShares Ultra SP500 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,791 in ProShares Ultra SP500 on September 4, 2024 and sell it today you would earn a total of 5,053 from holding ProShares Ultra SP500 or generate 105.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2x Leveraged vs. ProShares Ultra SP500
Performance |
| Timeline |
| ETRACS 2x Leveraged |
| ProShares Ultra SP500 |
ETRACS 2x and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2x and ProShares Ultra
The main advantage of trading using opposite ETRACS 2x and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2x 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.| ETRACS 2x vs. ProShares Ultra SP500 | ETRACS 2x vs. ProShares Ultra QQQ | ETRACS 2x vs. MicroSectors FANG Index | ETRACS 2x vs. ProShares Ultra Financials |
| ProShares Ultra vs. ProShares Ultra QQQ | ProShares Ultra vs. ProShares Ultra Dow30 | ProShares Ultra vs. ProShares UltraShort SP500 | ProShares Ultra vs. ProShares Ultra Financials |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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