Correlation Between ProShares UltraShort and ProShares Ultra

Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 UltraShort 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 UltraShort MSCI and ProShares Ultra Cloud, you can compare the effects of market volatilities on ProShares UltraShort 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 UltraShort with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ProShares Ultra.

Diversification Opportunities for ProShares UltraShort and ProShares Ultra

0.22

Correlation Coefficient

ProShares UltraShort  ProShares Ultra

Modest diversification

The 3 months correlation between ProShares and ProShares is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort MSCI and ProShares Ultra Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Cloud 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 MSCI 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 Cloud has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ProShares Ultra

Considering the 90-day investment horizon ProShares UltraShort is expected to generate 20.8 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, ProShares UltraShort MSCI is 1.39 times less risky than ProShares Ultra. It trades about 0.02 of its potential returns per unit of risk. ProShares Ultra Cloud is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,497  in ProShares Ultra Cloud on September 12, 2024 and sell it today you would earn a total of  1,461  from holding ProShares Ultra Cloud or generate 58.51% return on investment over 90 days.

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

ProShares UltraShort MSCI  vs.  ProShares Ultra Cloud

ProShares UltraShort MSCI

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort MSCI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ProShares UltraShort is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares Ultra Cloud

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Cloud are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ProShares Ultra unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraShort and ProShares Ultra

The main advantage of trading using opposite ProShares UltraShort and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 UltraShort MSCI and ProShares Ultra Cloud 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.