Correlation Between Nasdaq and ProShares Ultra

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

By analyzing existing cross correlation between Nasdaq Inc and ProShares Ultra Technology, you can compare the effects of market volatilities on Nasdaq and ProShares Ultra 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 Nasdaq with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and ProShares Ultra.

Diversification Opportunities for Nasdaq and ProShares Ultra

0.7

Correlation Coefficient

Nasdaq  ProShares Ultra

Poor diversification

The 3 months correlation between Nasdaq and ProShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and ProShares Ultra Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Tech and Nasdaq 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 Nasdaq Inc are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra Tech has no effect on the direction of Nasdaq i.e., Nasdaq and ProShares Ultra go up and down completely randomly.

Pair Corralation between Nasdaq and ProShares Ultra

Given the investment horizon of 90 days Nasdaq is expected to generate 1.39 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, Nasdaq Inc is 2.35 times less risky than ProShares Ultra. It trades about 0.17 of its potential returns per unit of risk. ProShares Ultra Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,407  in ProShares Ultra Technology on September 13, 2024 and sell it today you would earn a total of  917.00  from holding ProShares Ultra Technology or generate 14.31% return on investment over 90 days.

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

Nasdaq Inc  vs.  ProShares Ultra Technology

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares Ultra Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and ProShares Ultra

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

The idea behind Nasdaq Inc and ProShares Ultra Technology 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.