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 Health 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

0.59

Correlation Coefficient

ProShares Ultra  ProShares Ultra

Very weak diversification

The 3 months correlation between ProShares and ProShares is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Health 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 Health 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 Health is expected to under-perform the ProShares Ultra. In addition to that, ProShares Ultra is 1.08 times more volatile than ProShares Ultra SP500. It trades about -0.18 of its total potential returns per unit of risk. ProShares Ultra SP500 is currently generating about -0.17 per unit of volatility. If you would invest  7,665  in ProShares Ultra SP500 on January 25, 2024 and sell it today you would lose (461.00) from holding ProShares Ultra SP500 or give up 6.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

ProShares Ultra Health  vs.  ProShares Ultra SP500

ProShares Ultra Health

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ProShares Ultra SP500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra SP500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 Health 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.