Correlation Between ProShares Ultra and ProShares Ultra

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

By analyzing existing cross correlation between ProShares Ultra Semiconductors and ProShares Ultra SP500, you can compare the effects of market volatilities on ProShares Ultra and ProShares Ultra 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 ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and ProShares Ultra.

Diversification Opportunities for ProShares Ultra and ProShares Ultra

0.83

Correlation Coefficient

ProShares Ultra  ProShares Ultra

Very poor diversification

The 3 months correlation between ProShares and ProShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and ProShares Ultra SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra SP500 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 Semiconductors are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra SP500 has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares Ultra and ProShares Ultra

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 3.16 times more return on investment than ProShares Ultra. However, ProShares Ultra is 3.16 times more volatile than ProShares Ultra SP500. It trades about 0.18 of its potential returns per unit of risk. ProShares Ultra SP500 is currently generating about 0.11 per unit of risk. If you would invest  9,375  in ProShares Ultra Semiconductors on March 14, 2024 and sell it today you would earn a total of  4,926  from holding ProShares Ultra Semiconductors or generate 52.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

ProShares Ultra Semiconductors  vs.  ProShares Ultra SP500

ProShares Ultra Semi

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

ProShares Ultra SP500

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra SP500 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with ProShares Ultra and ProShares Ultra

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

The idea behind ProShares Ultra Semiconductors and ProShares Ultra 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.