Correlation Between ProShares UltraPro and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro 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 UltraPro 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 UltraPro SP500 and ProShares Ultra SmallCap600, you can compare the effects of market volatilities on ProShares UltraPro 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 UltraPro with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and ProShares Ultra.
Diversification Opportunities for ProShares UltraPro and ProShares Ultra
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and ProShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and ProShares Ultra SmallCap600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Smal 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 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 Smal has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and ProShares Ultra go up and down completely randomly.
Pair Corralation between ProShares UltraPro and ProShares Ultra
Given the investment horizon of 90 days ProShares UltraPro is expected to generate 1.77 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, ProShares UltraPro SP500 is 1.34 times less risky than ProShares Ultra. It trades about 0.17 of its potential returns per unit of risk. ProShares Ultra SmallCap600 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,667 in ProShares Ultra SmallCap600 on August 29, 2024 and sell it today you would earn a total of 445.00 from holding ProShares Ultra SmallCap600 or generate 16.69% 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. ProShares Ultra SmallCap600
Performance |
| Timeline |
| ProShares UltraPro SP500 |
| ProShares Ultra Smal |
ProShares UltraPro and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and ProShares Ultra
The main advantage of trading using opposite ProShares UltraPro and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro 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.| ProShares UltraPro vs. Direxion Daily SP | ProShares UltraPro vs. Direxion Daily Semiconductor | ProShares UltraPro vs. Direxion Daily Semiconductor |
| ProShares Ultra vs. ProShares Ultra MidCap400 | ProShares Ultra vs. ProShares Ultra Industrials | ProShares Ultra vs. ProShares Ultra Consumer | ProShares Ultra vs. ProShares Ultra Consumer |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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