Correlation Between ProShares Ultra and Microsectors Gold

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

By analyzing existing cross correlation between ProShares Ultra Silver and Microsectors Gold 3x, you can compare the effects of market volatilities on ProShares Ultra and Microsectors Gold 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 Microsectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Microsectors Gold.

Diversification Opportunities for ProShares Ultra and Microsectors Gold

0.92

Correlation Coefficient

ProShares Ultra  Microsectors Gold

Almost no diversification

The 3 months correlation between ProShares and Microsectors is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Silver and Microsectors Gold 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsectors Gold 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 Silver are associated (or correlated) with Microsectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsectors Gold has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Microsectors Gold go up and down completely randomly.

Pair Corralation between ProShares Ultra and Microsectors Gold

Considering the 90-day investment horizon ProShares Ultra Silver is expected to under-perform the Microsectors Gold. In addition to that, ProShares Ultra is 1.29 times more volatile than Microsectors Gold 3x. It trades about -0.15 of its total potential returns per unit of risk. Microsectors Gold 3x is currently generating about -0.06 per unit of volatility. If you would invest  4,320  in Microsectors Gold 3x on October 3, 2024 and sell it today you would lose (165.00) from holding Microsectors Gold 3x or give up 3.82% of portfolio value over 90 days.

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

ProShares Ultra Silver  vs.  Microsectors Gold 3x

ProShares Ultra Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Etf's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Microsectors Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsectors Gold 3x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with ProShares Ultra and Microsectors Gold

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

The idea behind ProShares Ultra Silver and Microsectors Gold 3x 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.