Correlation Between ProShares Ultra and ETRACS Monthly

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

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

Diversification Opportunities for ProShares Ultra and ETRACS Monthly

0.74

Correlation Coefficient

ProShares Ultra  ETRACS Monthly

Poor diversification

The 3 months correlation between ProShares and ETRACS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Consumer and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay 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 Consumer are associated (or correlated) with ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ETRACS Monthly go up and down completely randomly.

Pair Corralation between ProShares Ultra and ETRACS Monthly

Considering the 90-day investment horizon ProShares Ultra Consumer is expected to generate 2.33 times more return on investment than ETRACS Monthly. However, ProShares Ultra is 2.33 times more volatile than ETRACS Monthly Pay. It trades about 0.09 of its potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.06 per unit of risk. If you would invest  2,219  in ProShares Ultra Consumer on September 15, 2024 and sell it today you would earn a total of  3,505  from holding ProShares Ultra Consumer or generate 157.95% return on investment over 90 days.

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

ProShares Ultra Consumer  vs.  ETRACS Monthly Pay

ProShares Ultra Consumer

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Consumer are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

ETRACS Monthly Pay

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Monthly Pay are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ETRACS Monthly is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares Ultra and ETRACS Monthly

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

The idea behind ProShares Ultra Consumer and ETRACS Monthly Pay 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.