Correlation Between Tidal Trust and ProShares UltraPro

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

By analyzing existing cross correlation between Tidal Trust II and ProShares UltraPro SP500, you can compare the effects of market volatilities on Tidal Trust and ProShares UltraPro 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 Tidal Trust with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and ProShares UltraPro.

Diversification Opportunities for Tidal Trust and ProShares UltraPro

-0.02

Correlation Coefficient

Tidal Trust  ProShares UltraPro

Good diversification

The 3 months correlation between Tidal and ProShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and ProShares UltraPro SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro SP500 and Tidal Trust 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 Tidal Trust II are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro SP500 has no effect on the direction of Tidal Trust i.e., Tidal Trust and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Tidal Trust and ProShares UltraPro

Given the investment horizon of 90 days Tidal Trust II is expected to under-perform the ProShares UltraPro. But the etf apears to be less risky and, when comparing its historical volatility, Tidal Trust II is 2.36 times less risky than ProShares UltraPro. The etf trades about -0.04 of its potential returns per unit of risk. The ProShares UltraPro SP500 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,651  in ProShares UltraPro SP500 on October 13, 2024 and sell it today you would earn a total of  4,919  from holding ProShares UltraPro SP500 or generate 134.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.27%
Values	Daily Returns

Tidal Trust II  vs.  ProShares UltraPro SP500

Tidal Trust II

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Tidal Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares UltraPro SP500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraPro SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ProShares UltraPro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tidal Trust and ProShares UltraPro

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

The idea behind Tidal Trust II and ProShares UltraPro SP500 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.