Correlation Between ProShares Ultra and PIMCO Enhanced

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

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

Diversification Opportunities for ProShares Ultra and PIMCO Enhanced

-0.87

Correlation Coefficient

ProShares Ultra  PIMCO Enhanced

Pay attention - limited upside

The 3 months correlation between ProShares and PIMCO is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and PIMCO Enhanced Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Enhanced Short 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 Yen are associated (or correlated) with PIMCO Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Enhanced Short has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and PIMCO Enhanced go up and down completely randomly.

Pair Corralation between ProShares Ultra and PIMCO Enhanced

Considering the 90-day investment horizon ProShares Ultra Yen is expected to under-perform the PIMCO Enhanced. In addition to that, ProShares Ultra is 39.53 times more volatile than PIMCO Enhanced Short. It trades about -0.06 of its total potential returns per unit of risk. PIMCO Enhanced Short is currently generating about 0.53 per unit of volatility. If you would invest  9,766  in PIMCO Enhanced Short on September 2, 2024 and sell it today you would earn a total of  132.00  from holding PIMCO Enhanced Short or generate 1.35% return on investment over 90 days.

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

ProShares Ultra Yen  vs.  PIMCO Enhanced Short

ProShares Ultra Yen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Yen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PIMCO Enhanced Short

Risk-Adjusted Performance

41 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Enhanced Short are ranked lower than 41 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares Ultra and PIMCO Enhanced

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

The idea behind ProShares Ultra Yen and PIMCO Enhanced Short 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.