Correlation Between FT Cboe and ProShares Ultra

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

By analyzing existing cross correlation between FT Cboe Vest and ProShares Ultra Yen, you can compare the effects of market volatilities on FT Cboe 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 FT Cboe with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and ProShares Ultra.

Diversification Opportunities for FT Cboe and ProShares Ultra

0.48

Correlation Coefficient

FT Cboe  ProShares Ultra

Very weak diversification

The 3 months correlation between DSEP and ProShares is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and ProShares Ultra Yen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Yen and FT Cboe 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 FT Cboe Vest 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 Yen has no effect on the direction of FT Cboe i.e., FT Cboe and ProShares Ultra go up and down completely randomly.

Pair Corralation between FT Cboe and ProShares Ultra

Given the investment horizon of 90 days FT Cboe is expected to generate 5.64 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, FT Cboe Vest is 11.3 times less risky than ProShares Ultra. It trades about 0.43 of its potential returns per unit of risk. ProShares Ultra Yen is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,384  in ProShares Ultra Yen on June 12, 2024 and sell it today you would earn a total of  160.00  from holding ProShares Ultra Yen or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FT Cboe Vest  vs.  ProShares Ultra Yen

FT Cboe Vest

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ProShares Ultra Yen

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Yen are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, ProShares Ultra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FT Cboe and ProShares Ultra

The main advantage of trading using opposite FT Cboe and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe 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 FT Cboe Vest and ProShares Ultra Yen 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.