Correlation Between ProShares Ultra and Microsectors Gold

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Microsectors 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 Microsectors 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 Microsectors Gold 3x, you can compare the effects of market volatilities on ProShares Ultra and Microsectors 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 Microsectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Microsectors Gold.

Diversification Opportunities for ProShares Ultra and Microsectors Gold

0.98

Correlation Coefficient

ProShares Ultra  Microsectors Gold

Almost no diversification

The 3 months correlation between ProShares and Microsectors is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Gold and Microsectors Gold 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsectors Gold 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 Microsectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsectors Gold has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Microsectors Gold go up and down completely randomly.

Pair Corralation between ProShares Ultra and Microsectors Gold

Considering the 90-day investment horizon ProShares Ultra Gold is expected to generate 0.76 times more return on investment than Microsectors Gold. However, ProShares Ultra Gold is 1.32 times less risky than Microsectors Gold. It trades about -0.03 of its potential returns per unit of risk. Microsectors Gold 3x is currently generating about -0.06 per unit of risk. If you would invest  9,403  in ProShares Ultra Gold on September 25, 2024 and sell it today you would lose (162.00) from holding ProShares Ultra Gold or give up 1.72% of portfolio value over 90 days.

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

ProShares Ultra Gold  vs.  Microsectors Gold 3x

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Microsectors Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsectors Gold 3x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with ProShares Ultra and Microsectors Gold

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

The idea behind ProShares Ultra Gold and Microsectors Gold 3x 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.