Correlation Between ProShares Ultra and FAM

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

Diversification Opportunities for ProShares Ultra and FAM

-0.8

Correlation Coefficient

ProShares Ultra  FAM

Pay attention - limited upside

The 3 months correlation between ProShares and FAM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and FAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAM 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 FAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAM has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and FAM go up and down completely randomly.

Pair Corralation between ProShares Ultra and FAM

Considering the 90-day investment horizon ProShares Ultra Euro is expected to under-perform the FAM. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra Euro is 1.03 times less risky than FAM. The etf trades about -0.13 of its potential returns per unit of risk. The FAM is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  647.00  in FAM on September 3, 2024 and sell it today you would earn a total of  27.00  from holding FAM or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	25.0%
Values	Daily Returns

ProShares Ultra Euro  vs.  FAM

ProShares Ultra Euro

Risk-Adjusted Performance

0 of 100

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 latest conflicting performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

FAM

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days FAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain basic indicators, FAM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and FAM

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

The idea behind ProShares Ultra Euro and FAM 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.