Correlation Between ProShares Ultra and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and MicroSectors FANG 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 MicroSectors FANG 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 MicroSectors FANG Index, you can compare the effects of market volatilities on ProShares Ultra and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and MicroSectors FANG.
Diversification Opportunities for ProShares Ultra and MicroSectors FANG
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ProShares and MicroSectors is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Financials and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and MicroSectors FANG go up and down completely randomly.
Pair Corralation between ProShares Ultra and MicroSectors FANG
Considering the 90-day investment horizon ProShares Ultra is expected to generate 5.98 times less return on investment than MicroSectors FANG. But when comparing it to its historical volatility, ProShares Ultra Financials is 2.56 times less risky than MicroSectors FANG. It trades about 0.06 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 48,556 in MicroSectors FANG Index on November 18, 2024 and sell it today you would earn a total of 20,066 from holding MicroSectors FANG Index or generate 41.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Financials vs. MicroSectors FANG Index
Performance |
| Timeline |
| ProShares Ultra Fina |
| MicroSectors FANG Index |
ProShares Ultra and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and MicroSectors FANG
The main advantage of trading using opposite ProShares Ultra and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| ProShares Ultra vs. ProShares Ultra Real | ProShares Ultra vs. ProShares UltraShort Financials | ProShares Ultra vs. ProShares Ultra Basic | ProShares Ultra vs. ProShares Ultra Oil |
| MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. MicroSectors Solactive FANG | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Technology |
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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