Correlation Between ProShares UltraShort and ProShares UltraPro

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

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

Diversification Opportunities for ProShares UltraShort and ProShares UltraPro

0.35

Correlation Coefficient

ProShares UltraShort  ProShares UltraPro

Weak diversification

The 3 months correlation between ProShares and ProShares is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Consumer and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short and ProShares UltraShort 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 UltraShort Consumer 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 Short has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ProShares UltraPro go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ProShares UltraPro

Considering the 90-day investment horizon ProShares UltraShort is expected to generate 1.69 times less return on investment than ProShares UltraPro. But when comparing it to its historical volatility, ProShares UltraShort Consumer is 2.28 times less risky than ProShares UltraPro. It trades about 0.53 of its potential returns per unit of risk. ProShares UltraPro Short is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  4,328  in ProShares UltraPro Short on October 6, 2024 and sell it today you would earn a total of  799.00  from holding ProShares UltraPro Short or generate 18.46% return on investment over 90 days.

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

ProShares UltraShort Consumer  vs.  ProShares UltraPro Short

ProShares UltraShort

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Consumer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. 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 ProShares UltraShort and ProShares UltraPro

The main advantage of trading using opposite ProShares UltraShort and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 ProShares UltraShort Consumer and ProShares UltraPro Short 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.