Correlation Between ProShares Ultra and MFS Government

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

Diversification Opportunities for ProShares Ultra and MFS Government

0.81

Correlation Coefficient

ProShares Ultra  MFS Government

Very poor diversification

The 3 months correlation between ProShares and MFS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and MFS Government Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Government Markets 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 MFS Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Government Markets has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and MFS Government go up and down completely randomly.

Pair Corralation between ProShares Ultra and MFS Government

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 2.33 times more return on investment than MFS Government. However, ProShares Ultra is 2.33 times more volatile than MFS Government Markets. It trades about 0.1 of its potential returns per unit of risk. MFS Government Markets is currently generating about 0.11 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ProShares Ultra Euro  vs.  MFS Government Markets

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.

MFS Government Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Government Markets are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, MFS Government is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares Ultra and MFS Government

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

The idea behind ProShares Ultra Euro and MFS Government Markets 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.