Correlation Between ProShares Ultra and Invesco DB

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Invesco DB 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 Invesco DB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares Ultra Euro and Invesco DB Base, you can compare the effects of market volatilities on ProShares Ultra and Invesco DB 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 Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Invesco DB.

Diversification Opportunities for ProShares Ultra and Invesco DB

-0.53

Correlation Coefficient

ProShares Ultra  Invesco DB

Excellent diversification

The 3 months correlation between ProShares and Invesco is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and Invesco DB Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Base 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 Euro are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Base has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Invesco DB go up and down completely randomly.

Pair Corralation between ProShares Ultra and Invesco DB

Considering the 90-day investment horizon ProShares Ultra is expected to generate 1.32 times less return on investment than Invesco DB. But when comparing it to its historical volatility, ProShares Ultra Euro is 1.99 times less risky than Invesco DB. It trades about 0.32 of its potential returns per unit of risk. Invesco DB Base is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,976  in Invesco DB Base on February 14, 2024 and sell it today you would earn a total of  96.00  from holding Invesco DB Base or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

ProShares Ultra Euro  vs.  Invesco DB Base

ProShares Ultra Euro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Euro are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, ProShares Ultra is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco DB Base

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Base are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Invesco DB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and Invesco DB

The main advantage of trading using opposite ProShares Ultra and Invesco DB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Invesco DB 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 Invesco DB will offset losses from the drop in Invesco DB's long position.

The idea behind ProShares Ultra Euro and Invesco DB Base 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.