Correlation Between ProShares Ultra and ProShares

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

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

Diversification Opportunities for ProShares Ultra and ProShares

0.02

Correlation Coefficient

ProShares Ultra  ProShares

Significant diversification

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

Pair Corralation between ProShares Ultra and ProShares

Considering the 90-day investment horizon ProShares Ultra Oil is expected to generate 1.54 times more return on investment than ProShares. However, ProShares Ultra is 1.54 times more volatile than ProShares SP Kensho. It trades about 0.12 of its potential returns per unit of risk. ProShares SP Kensho is currently generating about -0.12 per unit of risk. If you would invest  3,484  in ProShares Ultra Oil on December 30, 2024 and sell it today you would earn a total of  641.00  from holding ProShares Ultra Oil or generate 18.4% return on investment over 90 days.

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

ProShares Ultra Oil  vs.  ProShares SP Kensho

ProShares Ultra Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Oil are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, ProShares Ultra reported solid returns over the last few months and may actually be approaching a breakup point.

ProShares SP Kensho

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP Kensho has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with ProShares Ultra and ProShares

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

The idea behind ProShares Ultra Oil and ProShares SP Kensho 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 Global Correlations module to find global opportunities by holding instruments from different markets.