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 Financials and ProShares Ultra Basic, 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
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ProShares and ProShares is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Financial and ProShares Ultra Basic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Basic 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 Financials 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 Basic 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 Financials is expected to under-perform the ProShares Ultra. In addition to that, ProShares UltraShort is 1.77 times more volatile than ProShares Ultra Basic. It trades about -0.24 of its total potential returns per unit of risk. ProShares Ultra Basic is currently generating about -0.03 per unit of volatility. If you would invest 2,908 in ProShares Ultra Basic on August 29, 2024 and sell it today you would lose (42.00) from holding ProShares Ultra Basic or give up 1.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Financial vs. ProShares Ultra Basic
Performance |
| Timeline |
| ProShares UltraShort |
| ProShares Ultra Basic |
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 Financials and ProShares Ultra Basic 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 Real | ProShares Ultra vs. ProShares Ultra Industrials | ProShares Ultra vs. ProShares Ultra Consumer | ProShares Ultra vs. ProShares Ultra Utilities |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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