Correlation Between ProShares Ultra and HCM Defender

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and HCM Defender 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 HCM Defender 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 HCM Defender 500, you can compare the effects of market volatilities on ProShares Ultra and HCM Defender 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 HCM Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and HCM Defender.

Diversification Opportunities for ProShares Ultra and HCM Defender

-0.8

Correlation Coefficient

ProShares Ultra  HCM Defender

Pay attention - limited upside

The 3 months correlation between ProShares and HCM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and HCM Defender 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 500 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 HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 500 has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and HCM Defender go up and down completely randomly.

Pair Corralation between ProShares Ultra and HCM Defender

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 1.07 times more return on investment than HCM Defender. However, ProShares Ultra is 1.07 times more volatile than HCM Defender 500. It trades about 0.1 of its potential returns per unit of risk. HCM Defender 500 is currently generating about -0.08 per unit of risk. If you would invest  1,051  in ProShares Ultra Euro on December 28, 2024 and sell it today you would earn a total of  77.00  from holding ProShares Ultra Euro or generate 7.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

ProShares Ultra Euro  vs.  HCM Defender 500

ProShares Ultra Euro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Euro are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HCM Defender 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCM Defender 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, HCM Defender is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Ultra and HCM Defender

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

The idea behind ProShares Ultra Euro and HCM Defender 500 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.