Correlation Between ProShares UltraPro and VanEck China

Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and VanEck China 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 UltraPro and VanEck China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares UltraPro MidCap400 and VanEck China Bond, you can compare the effects of market volatilities on ProShares UltraPro and VanEck China 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 UltraPro with a short position of VanEck China. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and VanEck China.

Diversification Opportunities for ProShares UltraPro and VanEck China

-0.24

Correlation Coefficient

ProShares UltraPro  VanEck China

Very good diversification

The 3 months correlation between ProShares and VanEck is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro MidCap400 and VanEck China Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck China Bond and ProShares UltraPro 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 UltraPro MidCap400 are associated (or correlated) with VanEck China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck China Bond has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and VanEck China go up and down completely randomly.

Pair Corralation between ProShares UltraPro and VanEck China

Given the investment horizon of 90 days ProShares UltraPro MidCap400 is expected to under-perform the VanEck China. In addition to that, ProShares UltraPro is 10.97 times more volatile than VanEck China Bond. It trades about -0.11 of its total potential returns per unit of risk. VanEck China Bond is currently generating about 0.02 per unit of volatility. If you would invest  2,199  in VanEck China Bond on December 30, 2024 and sell it today you would earn a total of  6.00  from holding VanEck China Bond or generate 0.27% return on investment over 90 days.

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

ProShares UltraPro MidCap400  vs.  VanEck China Bond

ProShares UltraPro

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraPro MidCap400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

VanEck China Bond

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck China Bond are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck China is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ProShares UltraPro and VanEck China

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

The idea behind ProShares UltraPro MidCap400 and VanEck China Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.