Correlation Between ProShares Ultra and WisdomTree Floating

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

Diversification Opportunities for ProShares Ultra and WisdomTree Floating

0.76

Correlation Coefficient

ProShares Ultra  WisdomTree Floating

Poor diversification

The 3 months correlation between ProShares and WisdomTree is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and WisdomTree Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Floating Rate 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 WisdomTree Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Floating Rate has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and WisdomTree Floating go up and down completely randomly.

Pair Corralation between ProShares Ultra and WisdomTree Floating

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 69.38 times more return on investment than WisdomTree Floating. However, ProShares Ultra is 69.38 times more volatile than WisdomTree Floating Rate. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Floating Rate is currently generating about 1.02 per unit of risk. If you would invest  1,051  in ProShares Ultra Euro on December 30, 2024 and sell it today you would earn a total of  88.00  from holding ProShares Ultra Euro or generate 8.37% return on investment over 90 days.

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

ProShares Ultra Euro  vs.  WisdomTree Floating Rate

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.

WisdomTree Floating Rate

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Floating Rate are ranked lower than 80 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, WisdomTree Floating is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Ultra and WisdomTree Floating

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

The idea behind ProShares Ultra Euro and WisdomTree Floating Rate 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.