Correlation Between ProShares Ultra and UBS ETRACS

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

Diversification Opportunities for ProShares Ultra and UBS ETRACS

-0.21

Correlation Coefficient

ProShares Ultra  UBS ETRACS

Very good diversification

The 3 months correlation between ProShares and UBS is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS 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 UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and UBS ETRACS go up and down completely randomly.

Pair Corralation between ProShares Ultra and UBS ETRACS

Considering the 90-day investment horizon ProShares Ultra is expected to generate 11.98 times less return on investment than UBS ETRACS. But when comparing it to its historical volatility, ProShares Ultra Euro is 11.64 times less risky than UBS ETRACS. It trades about 0.09 of its potential returns per unit of risk. UBS ETRACS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,076  in UBS ETRACS on December 25, 2024 and sell it today you would earn a total of  241.00  from holding UBS ETRACS or generate 22.4% return on investment over 90 days.

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

ProShares Ultra Euro  vs.  UBS ETRACS

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 7 (%) 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.

UBS ETRACS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETRACS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, UBS ETRACS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and UBS ETRACS

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

The idea behind ProShares Ultra Euro and UBS ETRACS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.