Correlation Between ProShares Ultra and Innovator

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

Diversification Opportunities for ProShares Ultra and Innovator

-0.83

Correlation Coefficient

ProShares Ultra  Innovator

Pay attention - limited upside

The 3 months correlation between ProShares and Innovator is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Innovator go up and down completely randomly.

Pair Corralation between ProShares Ultra and Innovator

Considering the 90-day investment horizon ProShares Ultra Euro is expected to under-perform the Innovator. In addition to that, ProShares Ultra is 1.99 times more volatile than Innovator SP 500. It trades about -0.19 of its total potential returns per unit of risk. Innovator SP 500 is currently generating about -0.01 per unit of volatility. If you would invest  3,944  in Innovator SP 500 on October 9, 2024 and sell it today you would lose (4.00) from holding Innovator SP 500 or give up 0.1% of portfolio value over 90 days.

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

ProShares Ultra Euro  vs.  Innovator SP 500

ProShares Ultra Euro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Euro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Innovator SP 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Innovator is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Ultra and Innovator

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

The idea behind ProShares Ultra Euro and Innovator SP 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.