Correlation Between ProShares Ultra and ARK Innovation

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

By analyzing existing cross correlation between ProShares Ultra Semiconductors and ARK Innovation ETF, you can compare the effects of market volatilities on ProShares Ultra and ARK Innovation 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 Ultra with a short position of ARK Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and ARK Innovation.

Diversification Opportunities for ProShares Ultra and ARK Innovation

0.0

Correlation Coefficient

ProShares Ultra  ARK Innovation

Pay attention - limited upside

The 3 months correlation between ProShares and ARK is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and ARK Innovation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Innovation ETF and ProShares Ultra 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 Ultra Semiconductors are associated (or correlated) with ARK Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Innovation ETF has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ARK Innovation go up and down completely randomly.

Pair Corralation between ProShares Ultra and ARK Innovation

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to under-perform the ARK Innovation. In addition to that, ProShares Ultra is 2.23 times more volatile than ARK Innovation ETF. It trades about -0.01 of its total potential returns per unit of risk. ARK Innovation ETF is currently generating about -0.01 per unit of volatility. If you would invest  5,798  in ARK Innovation ETF on November 28, 2024 and sell it today you would lose (198.00) from holding ARK Innovation ETF or give up 3.41% of portfolio value over 90 days.

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

ProShares Ultra Semiconductors  vs.  ARK Innovation ETF

ProShares Ultra Semi

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Ultra Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ProShares Ultra is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ARK Innovation ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Innovation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, ARK Innovation is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ProShares Ultra and ARK Innovation

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

The idea behind ProShares Ultra Semiconductors and ARK Innovation ETF 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.