Correlation Between ProShares UltraPro and MicroSectorsTM Oil

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

By analyzing existing cross correlation between ProShares UltraPro Short and MicroSectorsTM Oil Gas, you can compare the effects of market volatilities on ProShares UltraPro and MicroSectorsTM Oil 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 UltraPro with a short position of MicroSectorsTM Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and MicroSectorsTM Oil.

Diversification Opportunities for ProShares UltraPro and MicroSectorsTM Oil

0.69

Correlation Coefficient

ProShares UltraPro  MicroSectorsTM Oil

Poor diversification

The 3 months correlation between ProShares and MicroSectorsTM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Short and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas and ProShares UltraPro 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 UltraPro Short are associated (or correlated) with MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and MicroSectorsTM Oil go up and down completely randomly.

Pair Corralation between ProShares UltraPro and MicroSectorsTM Oil

Given the investment horizon of 90 days ProShares UltraPro Short is expected to under-perform the MicroSectorsTM Oil. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraPro Short is 1.65 times less risky than MicroSectorsTM Oil. The etf trades about -0.11 of its potential returns per unit of risk. The MicroSectorsTM Oil Gas is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,569  in MicroSectorsTM Oil Gas on August 30, 2024 and sell it today you would lose (199.00) from holding MicroSectorsTM Oil Gas or give up 12.68% of portfolio value over 90 days.

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

ProShares UltraPro Short  vs.  MicroSectorsTM Oil Gas

ProShares UltraPro Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraPro Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

MicroSectorsTM Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectorsTM Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with ProShares UltraPro and MicroSectorsTM Oil

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

The idea behind ProShares UltraPro Short and MicroSectorsTM Oil Gas 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.