Correlation Between ProShares Ultra and Tradr 2X

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

By analyzing existing cross correlation between ProShares Ultra QQQ and Tradr 2X Long, you can compare the effects of market volatilities on ProShares Ultra and Tradr 2X 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 Tradr 2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Tradr 2X.

Diversification Opportunities for ProShares Ultra and Tradr 2X

0.89

Correlation Coefficient

ProShares Ultra  Tradr 2X

Very poor diversification

The 3 months correlation between ProShares and Tradr is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra QQQ and Tradr 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradr 2X Long 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 QQQ are associated (or correlated) with Tradr 2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradr 2X Long has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Tradr 2X go up and down completely randomly.

Pair Corralation between ProShares Ultra and Tradr 2X

Considering the 90-day investment horizon ProShares Ultra QQQ is expected to generate 1.02 times more return on investment than Tradr 2X. However, ProShares Ultra is 1.02 times more volatile than Tradr 2X Long. It trades about 0.15 of its potential returns per unit of risk. Tradr 2X Long is currently generating about 0.15 per unit of risk. If you would invest  9,057  in ProShares Ultra QQQ on September 1, 2024 and sell it today you would earn a total of  1,764  from holding ProShares Ultra QQQ or generate 19.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

ProShares Ultra QQQ  vs.  Tradr 2X Long

ProShares Ultra QQQ

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra QQQ are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tradr 2X Long

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tradr 2X Long are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tradr 2X reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and Tradr 2X

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

The idea behind ProShares Ultra QQQ and Tradr 2X Long 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.