Correlation Between ProShares UltraPro and Innovator Power

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

By analyzing existing cross correlation between ProShares UltraPro SP500 and Innovator Power Buffer, you can compare the effects of market volatilities on ProShares UltraPro and Innovator Power 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 Innovator Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Innovator Power.

Diversification Opportunities for ProShares UltraPro and Innovator Power

1.0

Correlation Coefficient

ProShares UltraPro  Innovator Power

No risk reduction

The 3 months correlation between ProShares and Innovator is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and Innovator Power Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Power Buffer 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 SP500 are associated (or correlated) with Innovator Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Power Buffer has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Innovator Power go up and down completely randomly.

Pair Corralation between ProShares UltraPro and Innovator Power

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 5.87 times more return on investment than Innovator Power. However, ProShares UltraPro is 5.87 times more volatile than Innovator Power Buffer. It trades about 0.19 of its potential returns per unit of risk. Innovator Power Buffer is currently generating about 0.2 per unit of risk. If you would invest  7,637  in ProShares UltraPro SP500 on September 4, 2024 and sell it today you would earn a total of  2,125  from holding ProShares UltraPro SP500 or generate 27.83% return on investment over 90 days.

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

ProShares UltraPro SP500  vs.  Innovator Power Buffer

ProShares UltraPro SP500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro displayed solid returns over the last few months and may actually be approaching a breakup point.

Innovator Power Buffer

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Power Buffer are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator Power is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares UltraPro and Innovator Power

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

The idea behind ProShares UltraPro SP500 and Innovator Power Buffer 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.