Correlation Between ProShares UltraShort and ProShares UltraPro
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and ProShares UltraPro 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 UltraShort and ProShares UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Utilities and ProShares UltraPro SP500, you can compare the effects of market volatilities on ProShares UltraShort and ProShares UltraPro 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 UltraShort with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares UltraPro.
Diversification Opportunities for ProShares UltraShort and ProShares UltraPro
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ProShares and ProShares is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Utilities and ProShares UltraPro SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro SP500 and ProShares UltraShort 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 UltraShort Utilities are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro SP500 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares UltraPro go up and down completely randomly.
Pair Corralation between ProShares UltraShort and ProShares UltraPro
Considering the 90-day investment horizon ProShares UltraShort Utilities is expected to under-perform the ProShares UltraPro. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort Utilities is 1.1 times less risky than ProShares UltraPro. The etf trades about -0.22 of its potential returns per unit of risk. The ProShares UltraPro SP500 is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 6,884 in ProShares UltraPro SP500 on January 26, 2024 and sell it today you would lose (596.00) from holding ProShares UltraPro SP500 or give up 8.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Utilities vs. ProShares UltraPro SP500
Performance |
| Timeline |
| ProShares UltraShort |
| ProShares UltraPro SP500 |
ProShares UltraShort and ProShares UltraPro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and ProShares UltraPro
The main advantage of trading using opposite ProShares UltraShort and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, ProShares UltraPro 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 ProShares UltraPro will offset losses from the drop in ProShares UltraPro's long position.The idea behind ProShares UltraShort Utilities and ProShares UltraPro SP500 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.| ProShares UltraPro vs. ProShares UltraPro Dow30 | ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro QQQ | ProShares UltraPro vs. Direxion Daily Small |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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