Correlation Between ProShares UltraPro and Northern Lights
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and Northern Lights 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 UltraPro and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraPro Dow30 and Northern Lights, you can compare the effects of market volatilities on ProShares UltraPro and Northern Lights 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 UltraPro with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Northern Lights.
Diversification Opportunities for ProShares UltraPro and Northern Lights
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Northern is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Dow30 and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and ProShares UltraPro 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 UltraPro Dow30 are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Northern Lights go up and down completely randomly.
Pair Corralation between ProShares UltraPro and Northern Lights
Given the investment horizon of 90 days ProShares UltraPro Dow30 is expected to generate 3.35 times more return on investment than Northern Lights. However, ProShares UltraPro is 3.35 times more volatile than Northern Lights. It trades about 0.15 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of risk. If you would invest 9,608 in ProShares UltraPro Dow30 on August 30, 2024 and sell it today you would earn a total of 1,502 from holding ProShares UltraPro Dow30 or generate 15.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraPro Dow30 vs. Northern Lights
Performance |
| Timeline |
| ProShares UltraPro Dow30 |
| Northern Lights |
ProShares UltraPro and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and Northern Lights
The main advantage of trading using opposite ProShares UltraPro and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro SP500 | ProShares UltraPro vs. ProShares UltraPro Russell2000 | ProShares UltraPro vs. Direxion Daily SP500 |
| Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China | Northern Lights vs. Tidal Trust II |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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