Correlation Between ProShares UltraPro and KraneShares Emerging

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

Diversification Opportunities for ProShares UltraPro and KraneShares Emerging

-0.51

Correlation Coefficient

ProShares UltraPro  KraneShares Emerging

Excellent diversification

The 3 months correlation between ProShares and KraneShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and KraneShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Emerging 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 KraneShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Emerging has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and KraneShares Emerging go up and down completely randomly.

Pair Corralation between ProShares UltraPro and KraneShares Emerging

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 2.51 times more return on investment than KraneShares Emerging. However, ProShares UltraPro is 2.51 times more volatile than KraneShares Emerging Markets. It trades about -0.08 of its potential returns per unit of risk. KraneShares Emerging Markets is currently generating about -0.38 per unit of risk. If you would invest  9,759  in ProShares UltraPro SP500 on October 8, 2024 and sell it today you would lose (489.00) from holding ProShares UltraPro SP500 or give up 5.01% of portfolio value over 90 days.

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

ProShares UltraPro SP500  vs.  KraneShares Emerging Markets

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.

KraneShares Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Etf's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with ProShares UltraPro and KraneShares Emerging

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

The idea behind ProShares UltraPro SP500 and KraneShares Emerging Markets 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.