Correlation Between ProShares Ultra and Freedom Day

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

By analyzing existing cross correlation between ProShares Ultra MSCI and Freedom Day Dividend, you can compare the effects of market volatilities on ProShares Ultra and Freedom Day 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 Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Freedom Day.

Diversification Opportunities for ProShares Ultra and Freedom Day

-0.58

Correlation Coefficient

ProShares Ultra  Freedom Day

Excellent diversification

The 3 months correlation between ProShares and Freedom is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra MSCI and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend 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 MSCI are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Freedom Day go up and down completely randomly.

Pair Corralation between ProShares Ultra and Freedom Day

Considering the 90-day investment horizon ProShares Ultra MSCI is expected to under-perform the Freedom Day. In addition to that, ProShares Ultra is 4.49 times more volatile than Freedom Day Dividend. It trades about -0.15 of its total potential returns per unit of risk. Freedom Day Dividend is currently generating about -0.09 per unit of volatility. If you would invest  3,466  in Freedom Day Dividend on September 12, 2024 and sell it today you would lose (50.50) from holding Freedom Day Dividend or give up 1.46% of portfolio value over 90 days.

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

ProShares Ultra MSCI  vs.  Freedom Day Dividend

ProShares Ultra MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra MSCI 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 fundamental drivers 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.

Freedom Day Dividend

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and Freedom Day

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

The idea behind ProShares Ultra MSCI and Freedom Day Dividend 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.