Correlation Between ProShares UltraPro and Sparinvest INDEX

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

By analyzing existing cross correlation between ProShares UltraPro QQQ and Sparinvest INDEX Emerging, you can compare the effects of market volatilities on ProShares UltraPro and Sparinvest INDEX 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 UltraPro with a short position of Sparinvest INDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Sparinvest INDEX.

Diversification Opportunities for ProShares UltraPro and Sparinvest INDEX

0.47

Correlation Coefficient

ProShares UltraPro  Sparinvest INDEX

Very weak diversification

The 3 months correlation between ProShares and Sparinvest is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro QQQ and Sparinvest INDEX Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest INDEX Emerging and ProShares UltraPro 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 UltraPro QQQ are associated (or correlated) with Sparinvest INDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest INDEX Emerging has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Sparinvest INDEX go up and down completely randomly.

Pair Corralation between ProShares UltraPro and Sparinvest INDEX

Given the investment horizon of 90 days ProShares UltraPro QQQ is expected to generate 4.47 times more return on investment than Sparinvest INDEX. However, ProShares UltraPro is 4.47 times more volatile than Sparinvest INDEX Emerging. It trades about 0.08 of its potential returns per unit of risk. Sparinvest INDEX Emerging is currently generating about 0.01 per unit of risk. If you would invest  2,296  in ProShares UltraPro QQQ on January 24, 2024 and sell it today you would earn a total of  2,796  from holding ProShares UltraPro QQQ or generate 121.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.71%
Values	Daily Returns

ProShares UltraPro QQQ  vs.  Sparinvest INDEX Emerging

ProShares UltraPro QQQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraPro QQQ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Sparinvest INDEX Emerging

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Emerging are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent primary indicators, Sparinvest INDEX is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ProShares UltraPro and Sparinvest INDEX

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

The idea behind ProShares UltraPro QQQ and Sparinvest INDEX Emerging 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.