Correlation Between ProShares UltraPro and AIM ETF

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

Diversification Opportunities for ProShares UltraPro and AIM ETF

0.53

Correlation Coefficient

ProShares UltraPro  AIM ETF

Very weak diversification

The 3 months correlation between ProShares and AIM is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and AIM ETF Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIM ETF Products 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 AIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIM ETF Products has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and AIM ETF go up and down completely randomly.

Pair Corralation between ProShares UltraPro and AIM ETF

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to under-perform the AIM ETF. In addition to that, ProShares UltraPro is 6.34 times more volatile than AIM ETF Products. It trades about -0.04 of its total potential returns per unit of risk. AIM ETF Products is currently generating about 0.02 per unit of volatility. If you would invest  2,784  in AIM ETF Products on December 2, 2024 and sell it today you would earn a total of  13.00  from holding AIM ETF Products or generate 0.47% 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.  AIM ETF Products

ProShares UltraPro SP500

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraPro SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ProShares UltraPro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AIM ETF Products

Risk-Adjusted Performance

Weak

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

Pair Trading with ProShares UltraPro and AIM ETF

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

The idea behind ProShares UltraPro SP500 and AIM ETF Products 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.