Correlation Between AdvisorShares Dorsey and ProShares UltraPro

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

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

Diversification Opportunities for AdvisorShares Dorsey and ProShares UltraPro

0.76

Correlation Coefficient

AdvisorShares Dorsey  ProShares UltraPro

Poor diversification

The 3 months correlation between AdvisorShares and ProShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares Dorsey Wright and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short and AdvisorShares Dorsey 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 AdvisorShares Dorsey Wright 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 Short has no effect on the direction of AdvisorShares Dorsey i.e., AdvisorShares Dorsey and ProShares UltraPro go up and down completely randomly.

Pair Corralation between AdvisorShares Dorsey and ProShares UltraPro

Given the investment horizon of 90 days AdvisorShares Dorsey is expected to generate 2.65 times less return on investment than ProShares UltraPro. But when comparing it to its historical volatility, AdvisorShares Dorsey Wright is 2.25 times less risky than ProShares UltraPro. It trades about 0.3 of its potential returns per unit of risk. ProShares UltraPro Short is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  4,348  in ProShares UltraPro Short on October 4, 2024 and sell it today you would earn a total of  779.00  from holding ProShares UltraPro Short or generate 17.92% return on investment over 90 days.

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

AdvisorShares Dorsey Wright  vs.  ProShares UltraPro Short

AdvisorShares Dorsey

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Dorsey Wright are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, AdvisorShares Dorsey is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

ProShares UltraPro Short

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Short are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ProShares UltraPro is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with AdvisorShares Dorsey and ProShares UltraPro

The main advantage of trading using opposite AdvisorShares Dorsey and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvisorShares Dorsey 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 AdvisorShares Dorsey Wright and ProShares UltraPro Short 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..