Correlation Between Defiance Daily and ProShares UltraPro

Can any of the company-specific risk be diversified away by investing in both Defiance Daily and ProShares UltraPro 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 UltraPro 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 UltraPro MidCap400, you can compare the effects of market volatilities on Defiance Daily and ProShares UltraPro 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 UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Daily and ProShares UltraPro.

Diversification Opportunities for Defiance Daily and ProShares UltraPro

-0.76

Correlation Coefficient

Defiance Daily  ProShares UltraPro

Pay attention - limited upside

The 3 months correlation between Defiance and ProShares is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Daily Target and ProShares UltraPro MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro 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 UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro has no effect on the direction of Defiance Daily i.e., Defiance Daily and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Defiance Daily and ProShares UltraPro

Given the investment horizon of 90 days Defiance Daily Target is expected to generate 12.98 times more return on investment than ProShares UltraPro. However, Defiance Daily is 12.98 times more volatile than ProShares UltraPro MidCap400. It trades about 0.03 of its potential returns per unit of risk. ProShares UltraPro MidCap400 is currently generating about 0.18 per unit of risk. If you would invest  2,149  in Defiance Daily Target on September 2, 2024 and sell it today you would lose (1,538) from holding Defiance Daily Target or give up 71.57% of portfolio value over 90 days.

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

Defiance Daily Target  vs.  ProShares UltraPro MidCap400

Defiance Daily Target

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Daily Target are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Defiance Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

ProShares UltraPro

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro MidCap400 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ProShares UltraPro exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defiance Daily and ProShares UltraPro

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

The idea behind Defiance Daily Target and ProShares UltraPro MidCap400 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.