Correlation Between ProShares Ultra and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Invesco DWA 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 Invesco DWA 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 Invesco DWA Energy, you can compare the effects of market volatilities on ProShares Ultra and Invesco DWA 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 Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Invesco DWA.
Diversification Opportunities for ProShares Ultra and Invesco DWA
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ProShares and Invesco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Technology and Invesco DWA Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Energy 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Energy has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Invesco DWA go up and down completely randomly.
Pair Corralation between ProShares Ultra and Invesco DWA
Considering the 90-day investment horizon ProShares Ultra Technology is expected to under-perform the Invesco DWA. In addition to that, ProShares Ultra is 2.08 times more volatile than Invesco DWA Energy. It trades about -0.14 of its total potential returns per unit of risk. Invesco DWA Energy is currently generating about -0.11 per unit of volatility. If you would invest 4,549 in Invesco DWA Energy on December 5, 2024 and sell it today you would lose (323.00) from holding Invesco DWA Energy or give up 7.1% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
ProShares Ultra Technology vs. Invesco DWA Energy
Performance |
Timeline |
ProShares Ultra Tech |
Invesco DWA Energy |
ProShares Ultra and Invesco DWA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ProShares Ultra and Invesco DWA
The main advantage of trading using opposite ProShares Ultra and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Invesco DWA 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 Invesco DWA will offset losses from the drop in Invesco DWA's long position.ProShares Ultra vs. ProShares Ultra Health | ProShares Ultra vs. ProShares Ultra Semiconductors | ProShares Ultra vs. ProShares Ultra Industrials | ProShares Ultra vs. ProShares Ultra Consumer |
Invesco DWA vs. Invesco Dynamic Energy | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco DWA Industrials | Invesco DWA vs. Invesco DWA Consumer |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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