Correlation Between ProShares Ultra and Nuveen Preferred

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

Diversification Opportunities for ProShares Ultra and Nuveen Preferred

0.79

Correlation Coefficient

ProShares Ultra  Nuveen Preferred

Poor diversification

The 3 months correlation between ProShares and Nuveen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Nuveen Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Preferred 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 Nuveen Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Preferred has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Nuveen Preferred go up and down completely randomly.

Pair Corralation between ProShares Ultra and Nuveen Preferred

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 6.06 times more return on investment than Nuveen Preferred. However, ProShares Ultra is 6.06 times more volatile than Nuveen Preferred and. It trades about 0.11 of its potential returns per unit of risk. Nuveen Preferred and is currently generating about 0.15 per unit of risk. If you would invest  4,938  in ProShares Ultra Semiconductors on September 2, 2024 and sell it today you would earn a total of  1,362  from holding ProShares Ultra Semiconductors or generate 27.58% 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.  Nuveen Preferred and

ProShares Ultra Semi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 8 (%) 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.

Nuveen Preferred

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Preferred and are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Nuveen Preferred may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares Ultra and Nuveen Preferred

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

The idea behind ProShares Ultra Semiconductors and Nuveen Preferred and 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.