Correlation Between ProShares Ultra and AdvisorShares Dorsey

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

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

Diversification Opportunities for ProShares Ultra and AdvisorShares Dorsey

0.51

Correlation Coefficient

ProShares Ultra  AdvisorShares Dorsey

Very weak diversification

The 3 months correlation between ProShares and AdvisorShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and AdvisorShares Dorsey Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Dorsey 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 Euro are associated (or correlated) with AdvisorShares Dorsey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Dorsey has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and AdvisorShares Dorsey go up and down completely randomly.

Pair Corralation between ProShares Ultra and AdvisorShares Dorsey

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 1.09 times more return on investment than AdvisorShares Dorsey. However, ProShares Ultra is 1.09 times more volatile than AdvisorShares Dorsey Wright. It trades about -0.02 of its potential returns per unit of risk. AdvisorShares Dorsey Wright is currently generating about -0.08 per unit of risk. If you would invest  1,091  in ProShares Ultra Euro on November 27, 2024 and sell it today you would lose (19.00) from holding ProShares Ultra Euro or give up 1.74% of portfolio value over 90 days.

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

ProShares Ultra Euro  vs.  AdvisorShares Dorsey Wright

ProShares Ultra Euro

Risk-Adjusted Performance

Very Weak

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

AdvisorShares Dorsey

Risk-Adjusted Performance

Very Weak

Over the last 90 days AdvisorShares Dorsey Wright has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, AdvisorShares Dorsey is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ProShares Ultra and AdvisorShares Dorsey

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

The idea behind ProShares Ultra Euro and AdvisorShares Dorsey Wright 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.