Correlation Between ProShares Ultra and Sparinvest USA

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

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

Diversification Opportunities for ProShares Ultra and Sparinvest USA

0.75

Correlation Coefficient

ProShares Ultra  Sparinvest USA

Poor diversification

The 3 months correlation between ProShares and Sparinvest is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Bloomberg and Sparinvest USA Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest USA Value 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 Bloomberg are associated (or correlated) with Sparinvest USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest USA Value has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Sparinvest USA go up and down completely randomly.

Pair Corralation between ProShares Ultra and Sparinvest USA

Considering the 90-day investment horizon ProShares Ultra Bloomberg is expected to generate 3.85 times more return on investment than Sparinvest USA. However, ProShares Ultra is 3.85 times more volatile than Sparinvest USA Value. It trades about 0.01 of its potential returns per unit of risk. Sparinvest USA Value is currently generating about -0.01 per unit of risk. If you would invest  4,134  in ProShares Ultra Bloomberg on January 20, 2024 and sell it today you would lose (827.00) from holding ProShares Ultra Bloomberg or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

ProShares Ultra Bloomberg  vs.  Sparinvest USA Value

ProShares Ultra Bloomberg

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Bloomberg are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

Sparinvest USA Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparinvest USA Value has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent basic indicators, Sparinvest USA 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 Ultra and Sparinvest USA

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

The idea behind ProShares Ultra Bloomberg and Sparinvest USA Value 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.