Correlation Between MicroSectors Gold and ProShares UltraShort

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

By analyzing existing cross correlation between MicroSectors Gold 3X and ProShares UltraShort Silver, you can compare the effects of market volatilities on MicroSectors Gold and ProShares UltraShort 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 MicroSectors Gold with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Gold and ProShares UltraShort.

Diversification Opportunities for MicroSectors Gold and ProShares UltraShort

0.88

Correlation Coefficient

MicroSectors Gold  ProShares UltraShort

Very poor diversification

The 3 months correlation between MicroSectors and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold 3X and ProShares UltraShort Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and MicroSectors Gold 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 MicroSectors Gold 3X are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of MicroSectors Gold i.e., MicroSectors Gold and ProShares UltraShort go up and down completely randomly.

Pair Corralation between MicroSectors Gold and ProShares UltraShort

Given the investment horizon of 90 days MicroSectors Gold 3X is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, MicroSectors Gold 3X is 1.24 times less risky than ProShares UltraShort. The etf trades about -0.14 of its potential returns per unit of risk. The ProShares UltraShort Silver is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,854  in ProShares UltraShort Silver on December 2, 2024 and sell it today you would lose (277.00) from holding ProShares UltraShort Silver or give up 7.19% of portfolio value over 90 days.

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

MicroSectors Gold 3X  vs.  ProShares UltraShort Silver

MicroSectors Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors Gold 3X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

ProShares UltraShort

Risk-Adjusted Performance

Very Weak

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

Pair Trading with MicroSectors Gold and ProShares UltraShort

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

The idea behind MicroSectors Gold 3X and ProShares UltraShort Silver 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.