Correlation Between Xtrackers and ProShares UltraPro

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

By analyzing existing cross correlation between Xtrackers SP 500 and ProShares UltraPro Dow30, you can compare the effects of market volatilities on Xtrackers 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 Xtrackers with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and ProShares UltraPro.

Diversification Opportunities for Xtrackers and ProShares UltraPro

0.91

Correlation Coefficient

Xtrackers  ProShares UltraPro

Almost no diversification

The 3 months correlation between Xtrackers and ProShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP 500 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 Xtrackers 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 Xtrackers SP 500 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 Xtrackers i.e., Xtrackers and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Xtrackers and ProShares UltraPro

Given the investment horizon of 90 days Xtrackers SP 500 is expected to generate 0.32 times more return on investment than ProShares UltraPro. However, Xtrackers SP 500 is 3.16 times less risky than ProShares UltraPro. It trades about 0.08 of its potential returns per unit of risk. ProShares UltraPro Dow30 is currently generating about 0.02 per unit of risk. If you would invest  5,203  in Xtrackers SP 500 on September 24, 2024 and sell it today you would earn a total of  208.00  from holding Xtrackers SP 500 or generate 4.0% return on investment over 90 days.

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

Xtrackers SP 500  vs.  ProShares UltraPro Dow30

Xtrackers SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Xtrackers is not utilizing all of its potentials. The current 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 Xtrackers and ProShares UltraPro

The main advantage of trading using opposite Xtrackers and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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 Xtrackers SP 500 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.