Correlation Between ProShares UltraPro and Cambria Shareholder

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

Diversification Opportunities for ProShares UltraPro and Cambria Shareholder

0.83

Correlation Coefficient

ProShares UltraPro  Cambria Shareholder

Very poor diversification

The 3 months correlation between ProShares and Cambria is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and Cambria Shareholder Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Shareholder Yield 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 Cambria Shareholder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Shareholder Yield has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Cambria Shareholder go up and down completely randomly.

Pair Corralation between ProShares UltraPro and Cambria Shareholder

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 2.06 times more return on investment than Cambria Shareholder. However, ProShares UltraPro is 2.06 times more volatile than Cambria Shareholder Yield. It trades about 0.16 of its potential returns per unit of risk. Cambria Shareholder Yield is currently generating about 0.07 per unit of risk. If you would invest  8,100  in ProShares UltraPro SP500 on September 14, 2024 and sell it today you would earn a total of  1,660  from holding ProShares UltraPro SP500 or generate 20.49% return on investment over 90 days.

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

ProShares UltraPro SP500  vs.  Cambria Shareholder Yield

ProShares UltraPro SP500

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro displayed solid returns over the last few months and may actually be approaching a breakup point.

Cambria Shareholder Yield

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Shareholder Yield are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Cambria Shareholder is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares UltraPro and Cambria Shareholder

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

The idea behind ProShares UltraPro SP500 and Cambria Shareholder Yield 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.