Correlation Between ProShares UltraShort and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 ProShares UltraShort and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort MidCap400 and ProShares Ultra Russell2000, you can compare the effects of market volatilities on ProShares UltraShort 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 ProShares UltraShort with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares Ultra.
Diversification Opportunities for ProShares UltraShort and ProShares Ultra
-0.97 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and ProShares is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort MidCap400 and ProShares Ultra Russell2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Russ and ProShares UltraShort 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 UltraShort MidCap400 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 Russ has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Ultra go up and down completely randomly.
Pair Corralation between ProShares UltraShort and ProShares Ultra
Considering the 90-day investment horizon ProShares UltraShort MidCap400 is expected to under-perform the ProShares Ultra. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort MidCap400 is 1.35 times less risky than ProShares Ultra. The etf trades about -0.25 of its potential returns per unit of risk. The ProShares Ultra Russell2000 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,297 in ProShares Ultra Russell2000 on August 30, 2024 and sell it today you would earn a total of 724.00 from holding ProShares Ultra Russell2000 or generate 16.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort MidCap400 vs. ProShares Ultra Russell2000
Performance |
| Timeline |
| ProShares UltraShort |
| ProShares Ultra Russ |
ProShares UltraShort and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and ProShares Ultra
The main advantage of trading using opposite ProShares UltraShort and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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.The idea behind ProShares UltraShort MidCap400 and ProShares Ultra Russell2000 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.
| ProShares Ultra vs. ProShares Ultra MidCap400 | ProShares Ultra vs. ProShares Ultra SmallCap600 | ProShares Ultra vs. ProShares Ultra Dow30 | ProShares Ultra vs. ProShares UltraShort Russell2000 |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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