Correlation Between ProShares UltraPro and DOLLAR

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

Diversification Opportunities for ProShares UltraPro and DOLLAR

-0.32

Correlation Coefficient

ProShares UltraPro  DOLLAR

Very good diversification

The 3 months correlation between ProShares and DOLLAR is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and DOLLAR TREE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE INC 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 DOLLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLLAR TREE INC has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and DOLLAR go up and down completely randomly.

Pair Corralation between ProShares UltraPro and DOLLAR

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 6.2 times more return on investment than DOLLAR. However, ProShares UltraPro is 6.2 times more volatile than DOLLAR TREE INC. It trades about 0.09 of its potential returns per unit of risk. DOLLAR TREE INC is currently generating about 0.01 per unit of risk. If you would invest  5,931  in ProShares UltraPro SP500 on October 2, 2024 and sell it today you would earn a total of  2,932  from holding ProShares UltraPro SP500 or generate 49.44% return on investment over 90 days.

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

ProShares UltraPro SP500  vs.  DOLLAR TREE INC

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 January 2025.

DOLLAR TREE INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOLLAR TREE INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DOLLAR 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 DOLLAR

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

The idea behind ProShares UltraPro SP500 and DOLLAR TREE INC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.