Correlation Between ProShares Ultra and ProShares Trust

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

Diversification Opportunities for ProShares Ultra and ProShares Trust

0.4

Correlation Coefficient

ProShares Ultra  ProShares Trust

Very weak diversification

The 3 months correlation between ProShares and ProShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Consumer and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ProShares Trust go up and down completely randomly.

Pair Corralation between ProShares Ultra and ProShares Trust

Considering the 90-day investment horizon ProShares Ultra Consumer is expected to generate 0.35 times more return on investment than ProShares Trust. However, ProShares Ultra Consumer is 2.88 times less risky than ProShares Trust. It trades about -0.02 of its potential returns per unit of risk. ProShares Trust is currently generating about -0.24 per unit of risk. If you would invest  2,033  in ProShares Ultra Consumer on September 12, 2024 and sell it today you would lose (42.00) from holding ProShares Ultra Consumer or give up 2.07% of portfolio value over 90 days.

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

ProShares Ultra Consumer  vs.  ProShares Trust

ProShares Ultra Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

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

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with ProShares Ultra and ProShares Trust

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

The idea behind ProShares Ultra Consumer and ProShares Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.