Correlation Between ProShares Ultra and Innovator Nasdaq
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Innovator Nasdaq 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 Ultra and Innovator Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Ultra Semiconductors and Innovator Nasdaq 100 Power, you can compare the effects of market volatilities on ProShares Ultra and Innovator Nasdaq 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 Ultra with a short position of Innovator Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Innovator Nasdaq.
Diversification Opportunities for ProShares Ultra and Innovator Nasdaq
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Innovator is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Innovator Nasdaq 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Nasdaq 100 and ProShares Ultra 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 Ultra Semiconductors are associated (or correlated) with Innovator Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Nasdaq 100 has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Innovator Nasdaq go up and down completely randomly.
Pair Corralation between ProShares Ultra and Innovator Nasdaq
Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to under-perform the Innovator Nasdaq. In addition to that, ProShares Ultra is 13.48 times more volatile than Innovator Nasdaq 100 Power. It trades about -0.08 of its total potential returns per unit of risk. Innovator Nasdaq 100 Power is currently generating about 0.26 per unit of volatility. If you would invest 4,679 in Innovator Nasdaq 100 Power on August 29, 2024 and sell it today you would earn a total of 81.00 from holding Innovator Nasdaq 100 Power or generate 1.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Semiconductors vs. Innovator Nasdaq 100 Power
Performance |
| Timeline |
| ProShares Ultra Semi |
| Innovator Nasdaq 100 |
ProShares Ultra and Innovator Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and Innovator Nasdaq
The main advantage of trading using opposite ProShares Ultra and Innovator Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Innovator Nasdaq 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 Innovator Nasdaq will offset losses from the drop in Innovator Nasdaq's long position.| ProShares Ultra vs. Direxion Daily SP | ProShares Ultra vs. Direxion Daily Semiconductor | ProShares Ultra vs. Direxion Daily Semiconductor |
| Innovator Nasdaq vs. FT Vest Equity | Innovator Nasdaq vs. Northern Lights | Innovator Nasdaq vs. Dimensional International High | Innovator Nasdaq vs. First Trust Exchange Traded |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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