Correlation Between ProShares Ultra and Fidelity MSCI

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

Diversification Opportunities for ProShares Ultra and Fidelity MSCI

0.94

Correlation Coefficient

ProShares Ultra  Fidelity MSCI

Almost no diversification

The 3 months correlation between ProShares and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Consumer and Fidelity MSCI Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Consumer 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 Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Consumer has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Fidelity MSCI go up and down completely randomly.

Pair Corralation between ProShares Ultra and Fidelity MSCI

Considering the 90-day investment horizon ProShares Ultra Consumer is expected to generate 1.97 times more return on investment than Fidelity MSCI. However, ProShares Ultra is 1.97 times more volatile than Fidelity MSCI Consumer. It trades about 0.19 of its potential returns per unit of risk. Fidelity MSCI Consumer is currently generating about 0.04 per unit of risk. If you would invest  1,847  in ProShares Ultra Consumer on December 10, 2024 and sell it today you would earn a total of  127.00  from holding ProShares Ultra Consumer or generate 6.88% return on investment over 90 days.

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

ProShares Ultra Consumer  vs.  Fidelity MSCI Consumer

ProShares Ultra Consumer

Risk-Adjusted Performance

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fidelity MSCI Consumer

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Consumer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fidelity MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and Fidelity MSCI

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

The idea behind ProShares Ultra Consumer and Fidelity MSCI Consumer 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.