Correlation Between ProShares Ultra and Microsectors Gold
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Microsectors Gold 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 Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Ultra Yen and Microsectors Gold 3x, you can compare the effects of market volatilities on ProShares Ultra and Microsectors Gold 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 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Microsectors Gold.
Diversification Opportunities for ProShares Ultra and Microsectors Gold
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ProShares and Microsectors is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and Microsectors Gold 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsectors Gold 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 Yen are associated (or correlated) with Microsectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsectors Gold has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Microsectors Gold go up and down completely randomly.
Pair Corralation between ProShares Ultra and Microsectors Gold
Considering the 90-day investment horizon ProShares Ultra Yen is expected to under-perform the Microsectors Gold. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra Yen is 1.98 times less risky than Microsectors Gold. The etf trades about -0.13 of its potential returns per unit of risk. The Microsectors Gold 3x is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,034 in Microsectors Gold 3x on August 28, 2024 and sell it today you would earn a total of 277.00 from holding Microsectors Gold 3x or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Yen vs. Microsectors Gold 3x
Performance |
| Timeline |
| ProShares Ultra Yen |
| Microsectors Gold |
ProShares Ultra and Microsectors Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and Microsectors Gold
The main advantage of trading using opposite ProShares Ultra and Microsectors Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Microsectors Gold 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 Gold will offset losses from the drop in Microsectors Gold's long position.The idea behind ProShares Ultra Yen and Microsectors Gold 3x 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.| Microsectors Gold vs. MicroSectors Gold 3X | Microsectors Gold vs. Direxion Daily SP | Microsectors Gold vs. Direxion Daily FTSE | Microsectors Gold vs. UBS ETRACS |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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