Correlation Between ProShares UltraPro and PSMC

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

By analyzing existing cross correlation between ProShares UltraPro QQQ and PSMC, you can compare the effects of market volatilities on ProShares UltraPro and PSMC 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 PSMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and PSMC.

Diversification Opportunities for ProShares UltraPro and PSMC

0.0

Correlation Coefficient

ProShares UltraPro  PSMC

Pay attention - limited upside

The 3 months correlation between ProShares and PSMC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro QQQ and PSMC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSMC 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 QQQ are associated (or correlated) with PSMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSMC has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and PSMC go up and down completely randomly.

Pair Corralation between ProShares UltraPro and PSMC

Given the investment horizon of 90 days ProShares UltraPro QQQ is expected to generate 9.78 times more return on investment than PSMC. However, ProShares UltraPro is 9.78 times more volatile than PSMC. It trades about 0.1 of its potential returns per unit of risk. PSMC is currently generating about 0.0 per unit of risk. If you would invest  2,412  in ProShares UltraPro QQQ on October 27, 2024 and sell it today you would earn a total of  6,263  from holding ProShares UltraPro QQQ or generate 259.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	20.85%
Values	Daily Returns

ProShares UltraPro QQQ  vs.  PSMC

ProShares UltraPro QQQ

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro QQQ are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ProShares UltraPro reported solid returns over the last few months and may actually be approaching a breakup point.

PSMC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSMC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, PSMC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares UltraPro and PSMC

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

The idea behind ProShares UltraPro QQQ and PSMC 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.