Correlation Between ProShares UltraPro and Nuveen NASDAQ

Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and Nuveen NASDAQ 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 Nuveen NASDAQ 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 Nuveen NASDAQ 100, you can compare the effects of market volatilities on ProShares UltraPro and Nuveen NASDAQ 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 Nuveen NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Nuveen NASDAQ.

Diversification Opportunities for ProShares UltraPro and Nuveen NASDAQ

0.89

Correlation Coefficient

ProShares UltraPro  Nuveen NASDAQ

Very poor diversification

The 3 months correlation between ProShares and Nuveen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and Nuveen NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen NASDAQ 100 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 Nuveen NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen NASDAQ 100 has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Nuveen NASDAQ go up and down completely randomly.

Pair Corralation between ProShares UltraPro and Nuveen NASDAQ

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to under-perform the Nuveen NASDAQ. In addition to that, ProShares UltraPro is 2.99 times more volatile than Nuveen NASDAQ 100. It trades about -0.04 of its total potential returns per unit of risk. Nuveen NASDAQ 100 is currently generating about 0.25 per unit of volatility. If you would invest  2,535  in Nuveen NASDAQ 100 on September 23, 2024 and sell it today you would earn a total of  106.00  from holding Nuveen NASDAQ 100 or generate 4.18% return on investment over 90 days.

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

ProShares UltraPro SP500  vs.  Nuveen NASDAQ 100

ProShares UltraPro SP500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nuveen NASDAQ 100

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen NASDAQ 100 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Nuveen NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares UltraPro and Nuveen NASDAQ

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

The idea behind ProShares UltraPro SP500 and Nuveen NASDAQ 100 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.