Correlation Between ProShares Ultra and Innovator ETFs

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

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

Diversification Opportunities for ProShares Ultra and Innovator ETFs

0.95

Correlation Coefficient

ProShares Ultra  Innovator ETFs

Almost no diversification

The 3 months correlation between ProShares and Innovator is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra MSCI and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs Trust 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 MSCI are associated (or correlated) with Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Innovator ETFs go up and down completely randomly.

Pair Corralation between ProShares Ultra and Innovator ETFs

Considering the 90-day investment horizon ProShares Ultra MSCI is expected to under-perform the Innovator ETFs. In addition to that, ProShares Ultra is 2.73 times more volatile than Innovator ETFs Trust. It trades about -0.05 of its total potential returns per unit of risk. Innovator ETFs Trust is currently generating about -0.06 per unit of volatility. If you would invest  2,644  in Innovator ETFs Trust on September 5, 2024 and sell it today you would lose (64.00) from holding Innovator ETFs Trust or give up 2.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

ProShares Ultra MSCI  vs.  Innovator ETFs Trust

ProShares Ultra MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Innovator ETFs Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator ETFs Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Innovator ETFs is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Ultra and Innovator ETFs

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

The idea behind ProShares Ultra MSCI and Innovator ETFs Trust 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.