Correlation Between ProShares Ultra and US Treasury

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

By analyzing existing cross correlation between ProShares Ultra Semiconductors and US Treasury 5, you can compare the effects of market volatilities on ProShares Ultra and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and US Treasury.

Diversification Opportunities for ProShares Ultra and US Treasury

-0.79

Correlation Coefficient

ProShares Ultra  US Treasury

Pay attention - limited upside

The 3 months correlation between ProShares and UFIV is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and US Treasury 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 5 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 Semiconductors are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 5 has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and US Treasury go up and down completely randomly.

Pair Corralation between ProShares Ultra and US Treasury

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to under-perform the US Treasury. In addition to that, ProShares Ultra is 15.9 times more volatile than US Treasury 5. It trades about -0.2 of its total potential returns per unit of risk. US Treasury 5 is currently generating about 0.2 per unit of volatility. If you would invest  4,803  in US Treasury 5 on September 12, 2024 and sell it today you would earn a total of  42.00  from holding US Treasury 5 or generate 0.87% return on investment over 90 days.

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

ProShares Ultra Semiconductors  vs.  US Treasury 5

ProShares Ultra Semi

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

US Treasury 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, US Treasury is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ProShares Ultra and US Treasury

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

The idea behind ProShares Ultra Semiconductors and US Treasury 5 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.