Correlation Between T Rex and ProShares UltraPro

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

By analyzing existing cross correlation between T Rex 2X Long and ProShares UltraPro Short, you can compare the effects of market volatilities on T Rex 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 T Rex with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rex and ProShares UltraPro.

Diversification Opportunities for T Rex and ProShares UltraPro

-0.76

Correlation Coefficient

T Rex  ProShares UltraPro

Pay attention - limited upside

The 3 months correlation between NVDX and ProShares is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding T Rex 2X Long 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 T Rex 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 T Rex 2X Long 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 T Rex i.e., T Rex and ProShares UltraPro go up and down completely randomly.

Pair Corralation between T Rex and ProShares UltraPro

Given the investment horizon of 90 days T Rex 2X Long is expected to generate 1.82 times more return on investment than ProShares UltraPro. However, T Rex is 1.82 times more volatile than ProShares UltraPro Short. It trades about 0.17 of its potential returns per unit of risk. ProShares UltraPro Short is currently generating about -0.18 per unit of risk. If you would invest  1,106  in T Rex 2X Long on September 4, 2024 and sell it today you would earn a total of  641.00  from holding T Rex 2X Long or generate 57.96% return on investment over 90 days.

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

T Rex 2X Long  vs.  ProShares UltraPro Short

T Rex 2X

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rex 2X Long are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, T Rex showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares UltraPro Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraPro Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with T Rex and ProShares UltraPro

The main advantage of trading using opposite T Rex and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rex 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 T Rex 2X Long 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.