Correlation Between ProShares Ultra and WisdomTree High

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and WisdomTree High 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 WisdomTree High 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 WisdomTree High Yield, you can compare the effects of market volatilities on ProShares Ultra and WisdomTree High 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 WisdomTree High. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and WisdomTree High.

Diversification Opportunities for ProShares Ultra and WisdomTree High

-0.24

Correlation Coefficient

ProShares Ultra  WisdomTree High

Very good diversification

The 3 months correlation between ProShares and WisdomTree is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra QQQ and WisdomTree High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree High Yield 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 WisdomTree High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree High Yield has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and WisdomTree High go up and down completely randomly.

Pair Corralation between ProShares Ultra and WisdomTree High

Considering the 90-day investment horizon ProShares Ultra QQQ is expected to generate 14.08 times more return on investment than WisdomTree High. However, ProShares Ultra is 14.08 times more volatile than WisdomTree High Yield. It trades about 0.16 of its potential returns per unit of risk. WisdomTree High Yield is currently generating about 0.02 per unit of risk. If you would invest  9,482  in ProShares Ultra QQQ on September 12, 2024 and sell it today you would earn a total of  1,783  from holding ProShares Ultra QQQ or generate 18.8% return on investment over 90 days.

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

ProShares Ultra QQQ  vs.  WisdomTree High Yield

ProShares Ultra QQQ

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra QQQ are ranked lower than 12 (%) 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.

WisdomTree High Yield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree High Yield are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, WisdomTree High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares Ultra and WisdomTree High

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

The idea behind ProShares Ultra QQQ and WisdomTree High Yield 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.