Correlation Between ProShares Ultra and PGIM ETF

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

Diversification Opportunities for ProShares Ultra and PGIM ETF

-0.69

Correlation Coefficient

ProShares Ultra  PGIM ETF

Excellent diversification

The 3 months correlation between ProShares and PGIM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and PGIM ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM ETF Trust 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 PGIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM ETF Trust has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and PGIM ETF go up and down completely randomly.

Pair Corralation between ProShares Ultra and PGIM ETF

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 1.83 times more return on investment than PGIM ETF. However, ProShares Ultra is 1.83 times more volatile than PGIM ETF Trust. It trades about 0.1 of its potential returns per unit of risk. PGIM ETF Trust 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.  PGIM ETF Trust

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.

PGIM ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days PGIM ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, PGIM ETF is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ProShares Ultra and PGIM ETF

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

The idea behind ProShares Ultra Euro and PGIM ETF Trust 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.