Correlation Between Defiance Daily and ProShares Ultra

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

By analyzing existing cross correlation between Defiance Daily Target and ProShares Ultra SP500, you can compare the effects of market volatilities on Defiance Daily 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 Defiance Daily with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Daily and ProShares Ultra.

Diversification Opportunities for Defiance Daily and ProShares Ultra

0.78

Correlation Coefficient

Defiance Daily  ProShares Ultra

Poor diversification

The 3 months correlation between Defiance and ProShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Daily Target and ProShares Ultra SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra SP500 and Defiance Daily 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 Defiance Daily Target 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 SP500 has no effect on the direction of Defiance Daily i.e., Defiance Daily and ProShares Ultra go up and down completely randomly.

Pair Corralation between Defiance Daily and ProShares Ultra

Given the investment horizon of 90 days Defiance Daily Target is expected to generate 10.23 times more return on investment than ProShares Ultra. However, Defiance Daily is 10.23 times more volatile than ProShares Ultra SP500. It trades about 0.25 of its potential returns per unit of risk. ProShares Ultra SP500 is currently generating about 0.17 per unit of risk. If you would invest  1,918  in Defiance Daily Target on September 12, 2024 and sell it today you would earn a total of  7,237  from holding Defiance Daily Target or generate 377.32% return on investment over 90 days.

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

Defiance Daily Target  vs.  ProShares Ultra SP500

Defiance Daily Target

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Daily Target are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Defiance Daily showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares Ultra SP500

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra SP500 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defiance Daily and ProShares Ultra

The main advantage of trading using opposite Defiance Daily and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defiance Daily 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 Defiance Daily Target and ProShares Ultra SP500 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.