Correlation Between Invesco DWA and ProShares Ultra

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

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

Diversification Opportunities for Invesco DWA and ProShares Ultra

-0.04

Correlation Coefficient

Invesco DWA  ProShares Ultra

Good diversification

The 3 months correlation between Invesco and ProShares is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and ProShares Ultra Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Consumer and Invesco DWA 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 Invesco DWA Consumer 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 Consumer has no effect on the direction of Invesco DWA i.e., Invesco DWA and ProShares Ultra go up and down completely randomly.

Pair Corralation between Invesco DWA and ProShares Ultra

Considering the 90-day investment horizon Invesco DWA Consumer is expected to generate 0.61 times more return on investment than ProShares Ultra. However, Invesco DWA Consumer is 1.63 times less risky than ProShares Ultra. It trades about 0.09 of its potential returns per unit of risk. ProShares Ultra Consumer is currently generating about -0.09 per unit of risk. If you would invest  10,153  in Invesco DWA Consumer on September 20, 2024 and sell it today you would earn a total of  415.00  from holding Invesco DWA Consumer or generate 4.09% return on investment over 90 days.

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

Invesco DWA Consumer  vs.  ProShares Ultra Consumer

Invesco DWA Consumer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Invesco DWA is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

ProShares Ultra Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Invesco DWA and ProShares Ultra

The main advantage of trading using opposite Invesco DWA and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA 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 Invesco DWA Consumer and ProShares Ultra Consumer 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.