Correlation Between ProShares Ultra and Invesco Water

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

Diversification Opportunities for ProShares Ultra and Invesco Water

-0.43

Correlation Coefficient

ProShares Ultra  Invesco Water

Very good diversification

The 3 months correlation between ProShares and Invesco is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and Invesco Water Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Water Resources 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 Invesco Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Water Resources has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Invesco Water go up and down completely randomly.

Pair Corralation between ProShares Ultra and Invesco Water

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 1.28 times more return on investment than Invesco Water. However, ProShares Ultra is 1.28 times more volatile than Invesco Water Resources. It trades about 0.07 of its potential returns per unit of risk. Invesco Water Resources is currently generating about -0.03 per unit of risk. If you would invest  1,063  in ProShares Ultra Euro on December 26, 2024 and sell it today you would earn a total of  55.00  from holding ProShares Ultra Euro or generate 5.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ProShares Ultra Euro  vs.  Invesco Water Resources

ProShares Ultra Euro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Euro are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Water Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Water Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Invesco Water is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and Invesco Water

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

The idea behind ProShares Ultra Euro and Invesco Water Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.