Correlation Between ProShares Ultra and ProShares UltraShort

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

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

Diversification Opportunities for ProShares Ultra and ProShares UltraShort

0.05

Correlation Coefficient

ProShares Ultra  ProShares UltraShort

Significant diversification

The 3 months correlation between ProShares and ProShares is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Basic and ProShares UltraShort Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Oil 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 Basic are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort Oil has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ProShares Ultra and ProShares UltraShort

Considering the 90-day investment horizon ProShares Ultra Basic is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra Basic is 1.57 times less risky than ProShares UltraShort. The etf trades about -0.15 of its potential returns per unit of risk. The ProShares UltraShort Oil is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,977  in ProShares UltraShort Oil on September 19, 2024 and sell it today you would earn a total of  175.00  from holding ProShares UltraShort Oil or generate 4.4% return on investment over 90 days.

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

ProShares Ultra Basic  vs.  ProShares UltraShort Oil

ProShares Ultra Basic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Basic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

ProShares UltraShort Oil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ProShares UltraShort is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares Ultra and ProShares UltraShort

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

The idea behind ProShares Ultra Basic and ProShares UltraShort Oil 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.