Correlation Between ProShares UltraPro and ProShares Ultra

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

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

Diversification Opportunities for ProShares UltraPro and ProShares Ultra

0.66

Correlation Coefficient

ProShares UltraPro  ProShares Ultra

Poor diversification

The 3 months correlation between ProShares and ProShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Short and ProShares Ultra VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra VIX and ProShares UltraPro 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 UltraPro Short are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra VIX has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares UltraPro and ProShares Ultra

Given the investment horizon of 90 days ProShares UltraPro Short is expected to under-perform the ProShares Ultra. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraPro Short is 1.74 times less risky than ProShares Ultra. The etf trades about -0.18 of its potential returns per unit of risk. The ProShares Ultra VIX is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,483  in ProShares Ultra VIX on September 14, 2024 and sell it today you would lose (575.00) from holding ProShares Ultra VIX or give up 23.16% of portfolio value over 90 days.

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

ProShares UltraPro Short  vs.  ProShares Ultra VIX

ProShares UltraPro Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraPro Short has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

ProShares Ultra VIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra VIX 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with ProShares UltraPro and ProShares Ultra

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

The idea behind ProShares UltraPro Short and ProShares Ultra VIX 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.