Correlation Between ProShares UltraShort and MicroSectors Gold

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

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

Diversification Opportunities for ProShares UltraShort and MicroSectors Gold

-0.15

Correlation Coefficient

ProShares UltraShort  MicroSectors Gold

Good diversification

The 3 months correlation between ProShares and MicroSectors is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Euro and MicroSectors Gold 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold and ProShares UltraShort 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 UltraShort Euro are associated (or correlated) with MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and MicroSectors Gold go up and down completely randomly.

Pair Corralation between ProShares UltraShort and MicroSectors Gold

Considering the 90-day investment horizon ProShares UltraShort Euro is expected to generate 0.38 times more return on investment than MicroSectors Gold. However, ProShares UltraShort Euro is 2.61 times less risky than MicroSectors Gold. It trades about 0.05 of its potential returns per unit of risk. MicroSectors Gold 3X is currently generating about -0.14 per unit of risk. If you would invest  3,397  in ProShares UltraShort Euro on December 2, 2024 and sell it today you would earn a total of  98.00  from holding ProShares UltraShort Euro or generate 2.88% return on investment over 90 days.

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

ProShares UltraShort Euro  vs.  MicroSectors Gold 3X

ProShares UltraShort Euro

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Euro are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares UltraShort is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with ProShares UltraShort and MicroSectors Gold

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

The idea behind ProShares UltraShort Euro and MicroSectors Gold 3X 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.