Correlation Between ProShares Ultra and DB Gold

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

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

Diversification Opportunities for ProShares Ultra and DB Gold

-0.75

Correlation Coefficient

ProShares Ultra  DB Gold

Pay attention - limited upside

The 3 months correlation between ProShares and DGZ is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Gold and DB Gold Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Short 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 Gold are associated (or correlated) with DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Short has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and DB Gold go up and down completely randomly.

Pair Corralation between ProShares Ultra and DB Gold

Considering the 90-day investment horizon ProShares Ultra Gold is expected to generate 1.41 times more return on investment than DB Gold. However, ProShares Ultra is 1.41 times more volatile than DB Gold Short. It trades about 0.25 of its potential returns per unit of risk. DB Gold Short is currently generating about -0.22 per unit of risk. If you would invest  9,356  in ProShares Ultra Gold on October 21, 2024 and sell it today you would earn a total of  695.00  from holding ProShares Ultra Gold or generate 7.43% return on investment over 90 days.

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

ProShares Ultra Gold  vs.  DB Gold Short

ProShares Ultra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

DB Gold Short

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DB Gold Short are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, DB Gold 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 DB Gold

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

The idea behind ProShares Ultra Gold and DB Gold Short 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.