Correlation Between ETRACS Quarterly and ProShares UltraShort

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

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

Diversification Opportunities for ETRACS Quarterly and ProShares UltraShort

-0.77

Correlation Coefficient

ETRACS Quarterly  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between ETRACS and ProShares is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Quarterly Pay and ProShares UltraShort Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and ETRACS Quarterly 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 ETRACS Quarterly Pay are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of ETRACS Quarterly i.e., ETRACS Quarterly and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ETRACS Quarterly and ProShares UltraShort

Given the investment horizon of 90 days ETRACS Quarterly Pay is expected to under-perform the ProShares UltraShort. In addition to that, ETRACS Quarterly is 1.23 times more volatile than ProShares UltraShort Financials. It trades about -0.11 of its total potential returns per unit of risk. ProShares UltraShort Financials is currently generating about 0.31 per unit of volatility. If you would invest  3,204  in ProShares UltraShort Financials on September 25, 2024 and sell it today you would earn a total of  364.00  from holding ProShares UltraShort Financials or generate 11.36% return on investment over 90 days.

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

ETRACS Quarterly Pay  vs.  ProShares UltraShort Financial

ETRACS Quarterly Pay

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, ETRACS Quarterly is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Financials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with ETRACS Quarterly and ProShares UltraShort

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

The idea behind ETRACS Quarterly Pay and ProShares UltraShort Financials 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.