Correlation Between ProShares Ultra and SPDR SP

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and SPDR SP 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 SPDR SP 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 SPDR SP 500, you can compare the effects of market volatilities on ProShares Ultra and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and SPDR SP.

Diversification Opportunities for ProShares Ultra and SPDR SP

-0.83

Correlation Coefficient

ProShares Ultra  SPDR SP

Pay attention - limited upside

The 3 months correlation between ProShares and SPDR is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and SPDR SP go up and down completely randomly.

Pair Corralation between ProShares Ultra and SPDR SP

Considering the 90-day investment horizon ProShares Ultra Yen is expected to under-perform the SPDR SP. In addition to that, ProShares Ultra is 2.2 times more volatile than SPDR SP 500. It trades about -0.06 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about 0.2 per unit of volatility. If you would invest  55,039  in SPDR SP 500 on September 1, 2024 and sell it today you would earn a total of  5,216  from holding SPDR SP 500 or generate 9.48% 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.  SPDR SP 500

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

SPDR SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with ProShares Ultra and SPDR SP

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

The idea behind ProShares Ultra Yen and SPDR SP 500 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.