Correlation Between ProShares UltraShort and ETRACS 2xMonthly

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and ETRACS 2xMonthly 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 UltraShort and ETRACS 2xMonthly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares UltraShort Euro and ETRACS 2xMonthly Pay, you can compare the effects of market volatilities on ProShares UltraShort and ETRACS 2xMonthly 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 UltraShort with a short position of ETRACS 2xMonthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ETRACS 2xMonthly.

Diversification Opportunities for ProShares UltraShort and ETRACS 2xMonthly

-0.41

Correlation Coefficient

ProShares UltraShort  ETRACS 2xMonthly

Very good diversification

The 3 months correlation between ProShares and ETRACS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Euro and ETRACS 2xMonthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2xMonthly Pay and ProShares UltraShort 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 UltraShort Euro are associated (or correlated) with ETRACS 2xMonthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2xMonthly Pay has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ETRACS 2xMonthly go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ETRACS 2xMonthly

Considering the 90-day investment horizon ProShares UltraShort Euro is expected to generate 0.73 times more return on investment than ETRACS 2xMonthly. However, ProShares UltraShort Euro is 1.37 times less risky than ETRACS 2xMonthly. It trades about 0.18 of its potential returns per unit of risk. ETRACS 2xMonthly Pay is currently generating about 0.04 per unit of risk. If you would invest  3,025  in ProShares UltraShort Euro on September 2, 2024 and sell it today you would earn a total of  322.00  from holding ProShares UltraShort Euro or generate 10.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ProShares UltraShort Euro  vs.  ETRACS 2xMonthly Pay

ProShares UltraShort Euro

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Euro are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ETRACS 2xMonthly Pay

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with ProShares UltraShort and ETRACS 2xMonthly

The main advantage of trading using opposite ProShares UltraShort and ETRACS 2xMonthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, ETRACS 2xMonthly 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 ETRACS 2xMonthly will offset losses from the drop in ETRACS 2xMonthly's long position.

The idea behind ProShares UltraShort Euro and ETRACS 2xMonthly Pay 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..