Correlation Between ProShares UltraPro and Inspire SmallMid
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and Inspire SmallMid 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 Inspire SmallMid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraPro SP500 and Inspire SmallMid Cap, you can compare the effects of market volatilities on ProShares UltraPro and Inspire SmallMid 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 Inspire SmallMid. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Inspire SmallMid.
Diversification Opportunities for ProShares UltraPro and Inspire SmallMid
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Inspire is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and Inspire SmallMid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire SmallMid Cap 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 SP500 are associated (or correlated) with Inspire SmallMid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire SmallMid Cap has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Inspire SmallMid go up and down completely randomly.
Pair Corralation between ProShares UltraPro and Inspire SmallMid
Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 1.85 times more return on investment than Inspire SmallMid. However, ProShares UltraPro is 1.85 times more volatile than Inspire SmallMid Cap. It trades about 0.12 of its potential returns per unit of risk. Inspire SmallMid Cap is currently generating about 0.09 per unit of risk. If you would invest 6,996 in ProShares UltraPro SP500 on September 1, 2024 and sell it today you would earn a total of 2,709 from holding ProShares UltraPro SP500 or generate 38.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraPro SP500 vs. Inspire SmallMid Cap
Performance |
| Timeline |
| ProShares UltraPro SP500 |
| Inspire SmallMid Cap |
ProShares UltraPro and Inspire SmallMid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and Inspire SmallMid
The main advantage of trading using opposite ProShares UltraPro and Inspire SmallMid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro position performs unexpectedly, Inspire SmallMid 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 Inspire SmallMid will offset losses from the drop in Inspire SmallMid's long position.| ProShares UltraPro vs. ProShares UltraPro Dow30 | ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro QQQ | ProShares UltraPro vs. Direxion Daily Small |
| Inspire SmallMid vs. Schwab Fundamental Large | Inspire SmallMid vs. Schwab Fundamental International | Inspire SmallMid vs. Schwab Fundamental International | Inspire SmallMid vs. Schwab Fundamental Emerging |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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