Correlation Between ProShares Ultra and SPDR Portfolio

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and SPDR Portfolio 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 SPDR Portfolio 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 SPDR Portfolio TIPS, you can compare the effects of market volatilities on ProShares Ultra and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and SPDR Portfolio.

Diversification Opportunities for ProShares Ultra and SPDR Portfolio

-0.51

Correlation Coefficient

ProShares Ultra  SPDR Portfolio

Excellent diversification

The 3 months correlation between ProShares and SPDR is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra QQQ and SPDR Portfolio TIPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio TIPS 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio TIPS has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and SPDR Portfolio go up and down completely randomly.

Pair Corralation between ProShares Ultra and SPDR Portfolio

Considering the 90-day investment horizon ProShares Ultra QQQ is expected to generate 7.86 times more return on investment than SPDR Portfolio. However, ProShares Ultra is 7.86 times more volatile than SPDR Portfolio TIPS. It trades about 0.08 of its potential returns per unit of risk. SPDR Portfolio TIPS is currently generating about -0.13 per unit of risk. If you would invest  9,804  in ProShares Ultra QQQ on October 6, 2024 and sell it today you would earn a total of  972.00  from holding ProShares Ultra QQQ or generate 9.91% return on investment over 90 days.

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

ProShares Ultra QQQ  vs.  SPDR Portfolio TIPS

ProShares Ultra QQQ

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra QQQ are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SPDR Portfolio TIPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio TIPS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Ultra and SPDR Portfolio

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

The idea behind ProShares Ultra QQQ and SPDR Portfolio TIPS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.