Correlation Between ProShares Ultra and IPath Series

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

Diversification Opportunities for ProShares Ultra and IPath Series

0.6

Correlation Coefficient

ProShares Ultra  IPath Series

Poor diversification

The 3 months correlation between ProShares and IPath is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and iPath Series B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Series B 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 IPath Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Series B has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and IPath Series go up and down completely randomly.

Pair Corralation between ProShares Ultra and IPath Series

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 0.31 times more return on investment than IPath Series. However, ProShares Ultra Euro is 3.27 times less risky than IPath Series. It trades about -0.15 of its potential returns per unit of risk. iPath Series B is currently generating about -0.05 per unit of risk. If you would invest  1,199  in ProShares Ultra Euro on September 12, 2024 and sell it today you would lose (118.00) from holding ProShares Ultra Euro or give up 9.84% of portfolio value over 90 days.

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

ProShares Ultra Euro  vs.  iPath Series B

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.

iPath Series B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with ProShares Ultra and IPath Series

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

The idea behind ProShares Ultra Euro and iPath Series B 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.