Correlation Between ProShares Ultra and IQ Hedge

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and IQ Hedge 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 IQ Hedge 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 IQ Hedge Multi Strategy, you can compare the effects of market volatilities on ProShares Ultra and IQ Hedge 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 IQ Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and IQ Hedge.

Diversification Opportunities for ProShares Ultra and IQ Hedge

0.86

Correlation Coefficient

ProShares Ultra  IQ Hedge

Very poor diversification

The 3 months correlation between ProShares and QAI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Consumer and IQ Hedge Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Hedge Multi 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 IQ Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Hedge Multi has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IQ Hedge go up and down completely randomly.

Pair Corralation between ProShares Ultra and IQ Hedge

Considering the 90-day investment horizon ProShares Ultra Consumer is expected to generate 8.44 times more return on investment than IQ Hedge. However, ProShares Ultra is 8.44 times more volatile than IQ Hedge Multi Strategy. It trades about 0.2 of its potential returns per unit of risk. IQ Hedge Multi Strategy is currently generating about 0.04 per unit of risk. If you would invest  4,059  in ProShares Ultra Consumer on September 20, 2024 and sell it today you would earn a total of  1,312  from holding ProShares Ultra Consumer or generate 32.32% return on investment over 90 days.

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

ProShares Ultra Consumer  vs.  IQ Hedge Multi Strategy

ProShares Ultra Consumer

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Consumer are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

IQ Hedge Multi

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi Strategy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IQ Hedge is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Ultra and IQ Hedge

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

The idea behind ProShares Ultra Consumer and IQ Hedge Multi Strategy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.