Correlation Between ProShares UltraPro and ProShares UltraShort

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

By analyzing existing cross correlation between ProShares UltraPro SP500 and ProShares UltraShort MSCI, you can compare the effects of market volatilities on ProShares UltraPro and ProShares UltraShort 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 ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and ProShares UltraShort.

Diversification Opportunities for ProShares UltraPro and ProShares UltraShort

0.47

Correlation Coefficient

ProShares UltraPro  ProShares UltraShort

Very weak diversification

The 3 months correlation between ProShares and ProShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and ProShares UltraShort MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort MSCI 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 SP500 are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort MSCI has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ProShares UltraPro and ProShares UltraShort

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 1.42 times more return on investment than ProShares UltraShort. However, ProShares UltraPro is 1.42 times more volatile than ProShares UltraShort MSCI. It trades about 0.11 of its potential returns per unit of risk. ProShares UltraShort MSCI is currently generating about -0.03 per unit of risk. If you would invest  3,258  in ProShares UltraPro SP500 on October 5, 2024 and sell it today you would earn a total of  5,867  from holding ProShares UltraPro SP500 or generate 180.08% return on investment over 90 days.

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

ProShares UltraPro SP500  vs.  ProShares UltraShort MSCI

ProShares UltraPro SP500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ProShares UltraShort MSCI

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort MSCI are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraPro and ProShares UltraShort

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

The idea behind ProShares UltraPro SP500 and ProShares UltraShort MSCI 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.