Correlation Between ProShares UltraShort and UBS ETRACS
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and UBS ETRACS 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 UBS ETRACS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Basic and UBS ETRACS , you can compare the effects of market volatilities on ProShares UltraShort and UBS ETRACS 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 UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and UBS ETRACS.
Diversification Opportunities for ProShares UltraShort and UBS ETRACS
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between ProShares and UBS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Basic and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS 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 Basic are associated (or correlated) with UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and UBS ETRACS go up and down completely randomly.
Pair Corralation between ProShares UltraShort and UBS ETRACS
Considering the 90-day investment horizon ProShares UltraShort Basic is expected to generate 0.49 times more return on investment than UBS ETRACS. However, ProShares UltraShort Basic is 2.03 times less risky than UBS ETRACS. It trades about 0.01 of its potential returns per unit of risk. UBS ETRACS is currently generating about -0.23 per unit of risk. If you would invest 1,354 in ProShares UltraShort Basic on August 26, 2024 and sell it today you would earn a total of 2.00 from holding ProShares UltraShort Basic or generate 0.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Basic vs. UBS ETRACS
Performance |
| Timeline |
| ProShares UltraShort |
| UBS ETRACS |
ProShares UltraShort and UBS ETRACS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and UBS ETRACS
The main advantage of trading using opposite ProShares UltraShort and UBS ETRACS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, UBS ETRACS 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 UBS ETRACS will offset losses from the drop in UBS ETRACS's long position.The idea behind ProShares UltraShort Basic and UBS ETRACS 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.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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