Correlation Between ProShares Ultra and VanEck Digital

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

Diversification Opportunities for ProShares Ultra and VanEck Digital

0.65

Correlation Coefficient

ProShares Ultra  VanEck Digital

Poor diversification

The 3 months correlation between ProShares and VanEck is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and VanEck Digital Transformation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Digital Trans 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 VanEck Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Digital Trans has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and VanEck Digital go up and down completely randomly.

Pair Corralation between ProShares Ultra and VanEck Digital

Considering the 90-day investment horizon ProShares Ultra is expected to generate 2.25 times less return on investment than VanEck Digital. But when comparing it to its historical volatility, ProShares Ultra Semiconductors is 1.14 times less risky than VanEck Digital. It trades about 0.12 of its potential returns per unit of risk. VanEck Digital Transformation is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  977.00  in VanEck Digital Transformation on September 3, 2024 and sell it today you would earn a total of  903.00  from holding VanEck Digital Transformation or generate 92.43% return on investment over 90 days.

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

ProShares Ultra Semiconductors  vs.  VanEck Digital Transformation

ProShares Ultra Semi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

VanEck Digital Trans

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Digital Transformation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VanEck Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and VanEck Digital

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

The idea behind ProShares Ultra Semiconductors and VanEck Digital Transformation 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.