Correlation Between ProShares Ultra and ETRACS Quarterly
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and ETRACS Quarterly 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 ETRACS Quarterly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Ultra Financials and ETRACS Quarterly Pay, you can compare the effects of market volatilities on ProShares Ultra and ETRACS Quarterly 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 ETRACS Quarterly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and ETRACS Quarterly.
Diversification Opportunities for ProShares Ultra and ETRACS Quarterly
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ProShares and ETRACS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Financials and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay 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 Financials are associated (or correlated) with ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ETRACS Quarterly go up and down completely randomly.
Pair Corralation between ProShares Ultra and ETRACS Quarterly
Considering the 90-day investment horizon ProShares Ultra Financials is expected to generate 1.58 times more return on investment than ETRACS Quarterly. However, ProShares Ultra is 1.58 times more volatile than ETRACS Quarterly Pay. It trades about 0.13 of its potential returns per unit of risk. ETRACS Quarterly Pay is currently generating about 0.09 per unit of risk. If you would invest 4,365 in ProShares Ultra Financials on September 1, 2024 and sell it today you would earn a total of 5,305 from holding ProShares Ultra Financials or generate 121.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Financials vs. ETRACS Quarterly Pay
Performance |
| Timeline |
| ProShares Ultra Fina |
| ETRACS Quarterly Pay |
ProShares Ultra and ETRACS Quarterly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and ETRACS Quarterly
The main advantage of trading using opposite ProShares Ultra and ETRACS Quarterly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, ETRACS Quarterly 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 ETRACS Quarterly will offset losses from the drop in ETRACS Quarterly's long position.The idea behind ProShares Ultra Financials and ETRACS Quarterly Pay pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. iShares Trust |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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