Correlation Between ProShares UltraPro and Royce Quant
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and Royce Quant 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 Royce Quant 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 Royce Quant Small Cap, you can compare the effects of market volatilities on ProShares UltraPro and Royce Quant 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 Royce Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Royce Quant.
Diversification Opportunities for ProShares UltraPro and Royce Quant
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Royce is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and Royce Quant Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Quant Small 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 Royce Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Quant Small has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Royce Quant go up and down completely randomly.
Pair Corralation between ProShares UltraPro and Royce Quant
Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 1.25 times more return on investment than Royce Quant. However, ProShares UltraPro is 1.25 times more volatile than Royce Quant Small Cap. It trades about 0.36 of its potential returns per unit of risk. Royce Quant Small Cap is currently generating about 0.27 per unit of risk. If you would invest 8,266 in ProShares UltraPro SP500 on September 1, 2024 and sell it today you would earn a total of 1,439 from holding ProShares UltraPro SP500 or generate 17.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
ProShares UltraPro SP500 vs. Royce Quant Small Cap
Performance |
| Timeline |
| ProShares UltraPro SP500 |
| Royce Quant Small |
ProShares UltraPro and Royce Quant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and Royce Quant
The main advantage of trading using opposite ProShares UltraPro and Royce Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro position performs unexpectedly, Royce Quant 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 Royce Quant will offset losses from the drop in Royce Quant'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 |
| Royce Quant vs. First Trust Equity | Royce Quant vs. First Trust Small | Royce Quant vs. ClearBridge Dividend Strategy | Royce Quant vs. Principal Quality ETF |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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