Correlation Between ProShares Ultra and Legend BiotechCorp

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

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

Diversification Opportunities for ProShares Ultra and Legend BiotechCorp

0.13

Correlation Coefficient

ProShares Ultra  Legend BiotechCorp

Average diversification

The 3 months correlation between ProShares and Legend is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Legend BiotechCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend BiotechCorp 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 Semiconductors are associated (or correlated) with Legend BiotechCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend BiotechCorp has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Legend BiotechCorp go up and down completely randomly.

Pair Corralation between ProShares Ultra and Legend BiotechCorp

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 2.2 times more return on investment than Legend BiotechCorp. However, ProShares Ultra is 2.2 times more volatile than Legend BiotechCorp. It trades about 0.05 of its potential returns per unit of risk. Legend BiotechCorp is currently generating about -0.36 per unit of risk. If you would invest  8,956  in ProShares Ultra Semiconductors on February 14, 2024 and sell it today you would earn a total of  273.84  from holding ProShares Ultra Semiconductors or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

ProShares Ultra Semiconductors  vs.  Legend BiotechCorp

ProShares Ultra Semi

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Legend BiotechCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legend BiotechCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ProShares Ultra and Legend BiotechCorp

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

The idea behind ProShares Ultra Semiconductors and Legend BiotechCorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.