Correlation Between ProShares Ultra and Invesco SP

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

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

Diversification Opportunities for ProShares Ultra and Invesco SP

0.55

Correlation Coefficient

ProShares Ultra  Invesco SP

Very weak diversification

The 3 months correlation between ProShares and Invesco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra QQQ and Invesco SP Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Emerging and ProShares Ultra 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 Ultra QQQ are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP Emerging has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Invesco SP go up and down completely randomly.

Pair Corralation between ProShares Ultra and Invesco SP

Considering the 90-day investment horizon ProShares Ultra QQQ is expected to generate 2.56 times more return on investment than Invesco SP. However, ProShares Ultra is 2.56 times more volatile than Invesco SP Emerging. It trades about -0.07 of its potential returns per unit of risk. Invesco SP Emerging is currently generating about -0.19 per unit of risk. If you would invest  11,329  in ProShares Ultra QQQ on December 5, 2024 and sell it today you would lose (1,324) from holding ProShares Ultra QQQ or give up 11.69% of portfolio value over 90 days.

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

ProShares Ultra QQQ  vs.  Invesco SP Emerging

ProShares Ultra QQQ

Risk-Adjusted Performance

Very Weak

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

Invesco SP Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with ProShares Ultra and Invesco SP

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

The idea behind ProShares Ultra QQQ and Invesco SP Emerging 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.