Correlation Between ProShares UltraShort and DB Gold

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

By analyzing existing cross correlation between ProShares UltraShort Gold and DB Gold Double, you can compare the effects of market volatilities on ProShares UltraShort and DB 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 DB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and DB Gold.

Diversification Opportunities for ProShares UltraShort and DB Gold

-1.0

Correlation Coefficient

ProShares UltraShort  DB Gold

Pay attention - limited upside

The 3 months correlation between ProShares and DGP is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Gold and DB Gold Double in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Double 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 Gold are associated (or correlated) with DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Double has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and DB Gold go up and down completely randomly.

Pair Corralation between ProShares UltraShort and DB Gold

Considering the 90-day investment horizon ProShares UltraShort Gold is expected to under-perform the DB Gold. In addition to that, ProShares UltraShort is 1.05 times more volatile than DB Gold Double. It trades about -0.28 of its total potential returns per unit of risk. DB Gold Double is currently generating about 0.29 per unit of volatility. If you would invest  6,611  in DB Gold Double on December 28, 2024 and sell it today you would earn a total of  2,187  from holding DB Gold Double or generate 33.08% return on investment over 90 days.

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

ProShares UltraShort Gold  vs.  DB Gold Double

ProShares UltraShort Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraShort Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting 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.

DB Gold Double

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DB Gold Double are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, DB Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraShort and DB Gold

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

The idea behind ProShares UltraShort Gold and DB Gold Double 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.