Correlation Between ProShares Ultra and Defiance Next

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

By analyzing existing cross correlation between ProShares Ultra Technology and Defiance Next Gen, you can compare the effects of market volatilities on ProShares Ultra and Defiance Next 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 Defiance Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Defiance Next.

Diversification Opportunities for ProShares Ultra and Defiance Next

0.65

Correlation Coefficient

ProShares Ultra  Defiance Next

Poor diversification

The 3 months correlation between ProShares and Defiance is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Technology and Defiance Next Gen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Next Gen 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 Technology are associated (or correlated) with Defiance Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Next Gen has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Defiance Next go up and down completely randomly.

Pair Corralation between ProShares Ultra and Defiance Next

Considering the 90-day investment horizon ProShares Ultra Technology is expected to generate 1.49 times more return on investment than Defiance Next. However, ProShares Ultra is 1.49 times more volatile than Defiance Next Gen. It trades about -0.09 of its potential returns per unit of risk. Defiance Next Gen is currently generating about -0.14 per unit of risk. If you would invest  7,260  in ProShares Ultra Technology on December 3, 2024 and sell it today you would lose (1,230) from holding ProShares Ultra Technology or give up 16.94% of portfolio value over 90 days.

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

ProShares Ultra Technology  vs.  Defiance Next Gen

ProShares Ultra Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Ultra Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Defiance Next Gen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Defiance Next Gen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with ProShares Ultra and Defiance Next

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

The idea behind ProShares Ultra Technology and Defiance Next Gen 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.