Correlation Between SPDR Gold and ProShares Ultra

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

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

Diversification Opportunities for SPDR Gold and ProShares Ultra

-0.18

Correlation Coefficient

SPDR Gold  ProShares Ultra

Good diversification

The 3 months correlation between SPDR and ProShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares and ProShares Ultra Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Bloomberg and SPDR Gold 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 SPDR Gold Shares 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 Bloomberg has no effect on the direction of SPDR Gold i.e., SPDR Gold and ProShares Ultra go up and down completely randomly.

Pair Corralation between SPDR Gold and ProShares Ultra

Considering the 90-day investment horizon SPDR Gold is expected to generate 2.65 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, SPDR Gold Shares is 6.84 times less risky than ProShares Ultra. It trades about 0.31 of its potential returns per unit of risk. ProShares Ultra Bloomberg is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,373  in ProShares Ultra Bloomberg on February 19, 2024 and sell it today you would earn a total of  576.00  from holding ProShares Ultra Bloomberg or generate 41.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

SPDR Gold Shares  vs.  ProShares Ultra Bloomberg

SPDR Gold Shares

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal essential indicators, SPDR Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

ProShares Ultra Bloomberg

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Bloomberg are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward indicators, ProShares Ultra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Gold and ProShares Ultra

The main advantage of trading using opposite SPDR Gold and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Gold 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 SPDR Gold Shares and ProShares Ultra Bloomberg 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.