Correlation Between ProShares Ultra and KraneShares Emerging

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

Diversification Opportunities for ProShares Ultra and KraneShares Emerging

-0.48

Correlation Coefficient

ProShares Ultra  KraneShares Emerging

Very good diversification

The 3 months correlation between ProShares and KraneShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Technology and KraneShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares 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 Technology are associated (or correlated) with KraneShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Emerging has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and KraneShares Emerging go up and down completely randomly.

Pair Corralation between ProShares Ultra and KraneShares Emerging

Considering the 90-day investment horizon ProShares Ultra Technology is expected to generate 2.2 times more return on investment than KraneShares Emerging. However, ProShares Ultra is 2.2 times more volatile than KraneShares Emerging Markets. It trades about -0.01 of its potential returns per unit of risk. KraneShares Emerging Markets is currently generating about -0.38 per unit of risk. If you would invest  7,398  in ProShares Ultra Technology on October 8, 2024 and sell it today you would lose (72.00) from holding ProShares Ultra Technology or give up 0.97% of portfolio value over 90 days.

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

ProShares Ultra Technology  vs.  KraneShares Emerging Markets

ProShares Ultra Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in February 2025.

KraneShares Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Etf's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with ProShares Ultra and KraneShares Emerging

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

The idea behind ProShares Ultra Technology and KraneShares Emerging Markets 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.