Correlation Between ProShares Ultra and Franklin Liberty

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

Diversification Opportunities for ProShares Ultra and Franklin Liberty

-0.1

Correlation Coefficient

ProShares Ultra  Franklin Liberty

Good diversification

The 3 months correlation between ProShares and Franklin is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Franklin Liberty Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Federal 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 Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Federal has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Franklin Liberty go up and down completely randomly.

Pair Corralation between ProShares Ultra and Franklin Liberty

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to under-perform the Franklin Liberty. In addition to that, ProShares Ultra is 15.94 times more volatile than Franklin Liberty Federal. It trades about -0.09 of its total potential returns per unit of risk. Franklin Liberty Federal is currently generating about -0.03 per unit of volatility. If you would invest  2,363  in Franklin Liberty Federal on December 30, 2024 and sell it today you would lose (20.00) from holding Franklin Liberty Federal or give up 0.85% of portfolio value over 90 days.

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

ProShares Ultra Semiconductors  vs.  Franklin Liberty Federal

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 unfluctuating performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Franklin Liberty Federal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Liberty Federal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Franklin Liberty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and Franklin Liberty

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

The idea behind ProShares Ultra Semiconductors and Franklin Liberty Federal 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.