Correlation Between Global X and ProShares UltraPro

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

By analyzing existing cross correlation between Global X NASDAQ and ProShares UltraPro Dow30, you can compare the effects of market volatilities on Global X 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 Global X with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and ProShares UltraPro.

Diversification Opportunities for Global X and ProShares UltraPro

0.68

Correlation Coefficient

Global X  ProShares UltraPro

Poor diversification

The 3 months correlation between Global and ProShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Global X NASDAQ and ProShares UltraPro Dow30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Dow30 and Global X 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 Global X NASDAQ 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 Dow30 has no effect on the direction of Global X i.e., Global X and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Global X and ProShares UltraPro

Given the investment horizon of 90 days Global X is expected to generate 1.71 times less return on investment than ProShares UltraPro. But when comparing it to its historical volatility, Global X NASDAQ is 3.47 times less risky than ProShares UltraPro. It trades about 0.13 of its potential returns per unit of risk. ProShares UltraPro Dow30 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,547  in ProShares UltraPro Dow30 on September 24, 2024 and sell it today you would earn a total of  4,176  from holding ProShares UltraPro Dow30 or generate 75.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Global X NASDAQ  vs.  ProShares UltraPro Dow30

Global X NASDAQ

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares UltraPro Dow30

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Dow30 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ProShares UltraPro is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Global X and ProShares UltraPro

The main advantage of trading using opposite Global X and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X NASDAQ and ProShares UltraPro Dow30 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.