Correlation Between ProShares and ProShares Ultra

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

By analyzing existing cross correlation between ProShares K 1 Free and ProShares Ultra Bloomberg, you can compare the effects of market volatilities on ProShares 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 ProShares with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and ProShares Ultra.

Diversification Opportunities for ProShares and ProShares Ultra

0.24

Correlation Coefficient

ProShares  ProShares Ultra

Modest diversification

The 3 months correlation between ProShares and ProShares is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding ProShares K 1 Free and ProShares Ultra Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Bloomberg and ProShares 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 K 1 Free 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 Bloomberg has no effect on the direction of ProShares i.e., ProShares and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares and ProShares Ultra

Given the investment horizon of 90 days ProShares is expected to generate 5.28 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, ProShares K 1 Free is 8.27 times less risky than ProShares Ultra. It trades about 0.33 of its potential returns per unit of risk. ProShares Ultra Bloomberg is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,882  in ProShares Ultra Bloomberg on October 6, 2024 and sell it today you would earn a total of  1,057  from holding ProShares Ultra Bloomberg or generate 27.23% return on investment over 90 days.

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

ProShares K 1 Free  vs.  ProShares Ultra Bloomberg

ProShares K 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares K 1 Free has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ProShares Ultra Bloomberg

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Bloomberg are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ProShares and ProShares Ultra

The main advantage of trading using opposite ProShares and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares 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 ProShares K 1 Free and ProShares Ultra Bloomberg 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.