Correlation Between ProShares Ultra and SPDR SP

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

Diversification Opportunities for ProShares Ultra and SPDR SP

-0.79

Correlation Coefficient

ProShares Ultra  SPDR SP

Pay attention - limited upside

The 3 months correlation between ProShares and SPDR is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and SPDR SP MIDCAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP MIDCAP 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP MIDCAP has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and SPDR SP go up and down completely randomly.

Pair Corralation between ProShares Ultra and SPDR SP

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 1.13 times more return on investment than SPDR SP. However, ProShares Ultra is 1.13 times more volatile than SPDR SP MIDCAP. It trades about 0.1 of its potential returns per unit of risk. SPDR SP MIDCAP is currently generating about -0.06 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	Weak
Accuracy	100.0%
Values	Daily Returns

ProShares Ultra Euro  vs.  SPDR SP MIDCAP

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.

SPDR SP MIDCAP

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP MIDCAP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and SPDR SP

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

The idea behind ProShares Ultra Euro and SPDR SP MIDCAP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.