Correlation Between ProShares Ultra and ETF Series

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

Diversification Opportunities for ProShares Ultra and ETF Series

0.91

Correlation Coefficient

ProShares Ultra  ETF Series

Almost no diversification

The 3 months correlation between ProShares and ETF is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Technology and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ETF Series go up and down completely randomly.

Pair Corralation between ProShares Ultra and ETF Series

Considering the 90-day investment horizon ProShares Ultra Technology is expected to generate 3.52 times more return on investment than ETF Series. However, ProShares Ultra is 3.52 times more volatile than ETF Series Solutions. It trades about 0.15 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.2 per unit of risk. If you would invest  5,801  in ProShares Ultra Technology on September 5, 2024 and sell it today you would earn a total of  1,463  from holding ProShares Ultra Technology or generate 25.22% return on investment over 90 days.

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

ProShares Ultra Technology  vs.  ETF Series Solutions

ProShares Ultra Tech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

ETF Series Solutions

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, ETF Series may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares Ultra and ETF Series

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

The idea behind ProShares Ultra Technology and ETF Series Solutions 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.